2012 - Packaging | Solutions...ENGAGEMENT wiTH STAkEHOldERS We consider open and transparent communication with our stakeholders to be key in building credibility on the issues that

sustainable development RepoRt 2012

CONTENTS

2 SmurfitKappaataGlance

4 PackagingExpertise

5 Highlights

6 LetterfromourCEO

8 CorporateGovernance

10 EngagementwithStakeholders

12 Materiality

13 Strategy

15 OurCommitmentandApproach toSustainableDevelopment

17 KeyRisksandChallenges

20 SustainableDevelopment Commitments

26 Environment

44 SocialDevelopment

66 SustainabilityinourBusiness

76 DataTables

85 AbouttheReport

86 GRIGuidelines

91 BusinessintheCommunityIreland

92 UnitedNationsGlobalCompact

93 IndependentAssuranceReport

94 Glossary

ThefirstsectionoftheReportsummarises ourpolicyonengagementwithstakeholders,materiality,ouroverallapproachtosustainability,andourlongtermcommitments.ThisisthenfollowedbythreemajorsectionscoveringEnvironment,SocialDevelopmentandSustainabilityinourBusiness.TheReportconcludeswithadetailedinformationsectionandaglossary oftechnicalterms.InpreparingthisReportwehavefollowedtheGlobalReportingInitiative(GRI)3.1guidelines.

Simone Angelini from Smurfit Kappa Vignate, Italy.Cover image: Volker Funk (l.) and Mirja Thimm, both working at our Brühl plant in Germany.

SMURFIT KAPPASUSTAINABLEDEVELOPMENTREPORT20122

MexicoEnergy and CO2 Cerro Gordo paper mill cuts GHG emissions by using less steam

ColombiaCommunity Involvement 50th Anniversary Fundación Smurfit Cartón de Colombia supporting local communities

ArgentinaWater Treatment A new water treatment plant commissioned in our Bernal paper mill

VenezuelaCommunity InvolvementOur forestry workers volunteer as local fire brigade

SMURfITKAPPAATAGLANCETotally focused on packaging: Withsalesin2012ofover€7.3billion,SmurfitKappaisoneofthelargestintegratedmanufacturersofpaper-basedpackagingproducts.followingtheacquisitionofOrangeCountyContainerGroupinlate2012,SmurfitKappanowhas348facilitiesin32countriesinEuropeandNorthandSouthAmerica(the“Americas”),wheretheGroupalsoownsandmanagesforests. Itmanufactures,distributesandsellscontainerboard,corrugatedcontainersandotherpaper-basedpackagingproductsandmaterialssuchassolidboard,sackpaperandbag-in-box.

SmurfitKappaisfullydedicatedtothesustainablesupplyofpaper-basedpackagingsolutionsandhasnoownershipofsignificantbusinessesoutsidethisfieldofexpertise.

SMURFIT KAPPASUSTAINABLEDEVELOPMENTREPORT2012 3SMURFIT KAPPASUSTAINABLEDEVELOPMENTREPORT2012

Russia Supplier commitment Sustainability an important ingredient in Russian partnership

Germany Training and Development Over 1,100 employees have now participated in the German sales training programme

A wORld Of SuSTAiNABiliTy

BelgiumProduct Innovation The smart dashboard box

SpainHealth and Safety Mengibar paper mill initiated an extensive programme to raise awareness on health and safety at home

ItalyCommunity Involvement fundraising campaign at Panaro


PACKAGINGExPERTISETheimagebelowillustratestheproductlifecyclestartingwithvirginandrecoveredfibresbeingprocessedthroughthemillstobecomepaperandboard;thenontotheboxconvertingplantswheretheybecomepackaging;thenenteringthesupplychaintotheeventualuser.Therecycling processbeginswhentheusedpackagingiscollected, sortedandthenreturnedtothemills forreprocessing.


HiGHliGHTSCHAIn OF CUSTODy CERTIFICATIOnEurope.february2013successfulcompletionofathreeyearfSC®and/orPEfCcertificationprogramme forEuropeanconvertingoperationsreachingourobjectivetocertifyallconvertingplantsinEuropefor whichacertificationisrelevant.

Latin America. AllMexicanoperationsreceivedChainofCustodycertificationsunderfSC;thesamecertificationswerealsoreceivedforourintegratedconvertingoperationsinArgentina.

Certified Packaging. ThecompletionoftheEuropeancertificationprogramme(seeabove)alsoledtoover 90%ofallGroupconvertingoperationsbeingcertifiedtherebyachievingtheGroup’sfirstlongtermcommitmentonsustainabilitytwoyearsaheadofschedule.

CO2 REDUCTIOn Year-on-year,absolutefossilCO2 emissionsforthetotalGroupwerereducedby1.8%. OurglobalmillsystemreduceditsfossilCO2 emissionsby3.1%pertonneofpaperandboardproduced.

COD DISCHARGE REDUCTIOn Year-on-year,absoluteCODdischargesforthetotalGroupwerereducedby1.7%.Globally,ourmillsystemreduceditsCODdischargesby4.7%pertonneofpaperandboardproduced.

InVESTMEnTS In THE EnVIROnMEnTCO2 Reduction.

nInstallationofanewshoepressinourCerroGordopapermill,MexicoCityinJanuary2012.

nRebuildofbiomassboilerinourNavarrapapermillinSpainandsubsequentstart-upinSeptember2012.

nCommissioningofanewCHPinstallationinourBarranquillapapermillinColombiainOctober2012.

nCompletionofanewlimekilninourCalipapermillinColombiainMarch2013.

COD Water Discharges.CommissioningofanewwatertreatmentplantinourBernalpapermillin ArgentinainMay2012.

CODE OF BUSInESS COnDUCT Revisedcodeapprovedandawarenesscampaigninitiated.

SUSTAInABlE PACKAGInG PackExperttoolextendedwithenvironmentalparameters,enablingcustomerstomeasureandcomparetheenvironmentalimpactsoftheirsupplychainmanagement.

ACqUISITIOnS OrangeCountyContainerGroup(“OCCG”)wasacquiredinDecember2012,markingourfirstsizeableacquisitionsinceSmurfitKappawasformedin2005.OCCGisaChainofCustodycertifiedGroupactivemainlyinnorthernMexicoandthesouthernUSAdeliveringcontainerboardandconvertedcorrugatedproductstothesamerangeofcustomersasSmurfitKappa.


LETTERfROMOURCEO

iNTROduCTiON By GARy McGANN IampleasedtointroduceSmurfitKappa’ssixthannualSustainableDevelopmentReport.Asisshowninthisreport,SmurfitKappaisfundamentallycommittedtosustainabilityandsocialresponsibilityinitsinteractionwithitscustomers,suppliers,employees,thecommunitiesinwhichitisprivilegedtodobusinessandinrelationtoitsimpactonthebroaderenvironment.Sustainabilityhasbecomeakeybusinessdriverand isaplatformfordifferentiationinthemarket.

Asinrecentyears,economicconditionscontinuetobechallenging.Nevertheless,in2012andcontinuingin2013,wehaveshownourcommitmenttosustainabilitybynotonlymakingsignificantinvestmentsintheenvironmentbutalsobyreachingthefirsttargetofourlongtermsustainabilitycommitments.In2013,wewillcontinuethedrivetodemonstratetoourstakeholdersthatsustainabilityobjectivesareachievable,beneficialtoourbusinessandeconomicallyviable.Thebestwaytodothatisbycreatingeconomic,socialandenvironmentalwin-winsituationsforallstakeholdersinvolved. Asafurtherintroductiontothe2012SustainableDevelopmentReportIwouldliketohighlighta numberofdevelopments.

OuR ViSiON ON SuSTAiNABiliTyOverthepastyearwehaveworkedtosetoutourfundamentalviewsonsustainabilityinastrategicvisionstatement.In2010wemadefourmajorlongtermcommitmentsintheareaofsustainabilityand,asasecondstep,wehavenowdevelopedamorestrategicvisiononsustainabilitywhichwehavepublishedandentitled“TheSmurfitKappaVisiononSustainability”. Inthisstatementweexplainwhyweconsidersustainabilitytobeakeybusinessdriverandwhy

itisverynaturalforourbusiness.furthermore,weexplainwhySmurfitKappaiscommittedtosustainability,howwemakeourcommitmenttosustainabilitytangible,andwhatourobjectivesandtargetsareforthesevenkeysustainabilitybuildingblocksthatwehaveidentifiedforourbusiness.Thescopeofourlongtermobjectivesandtargetshasbeenwidenedtoinclude(besidesthecurrentlongtermcommitmentsinChainofCustodycertification,reductionoffossilCO2emissionsandreductioninCODdischarges)anumberofotherareasthatweconsiderimportantintheareaofsustainability.Theseareasarewastemanagement,waterusage,safetyatworkandourinvolvementinthelocalcommunitieswhereweoperateandwherewewishtomakeadifferenceforthelocalpopulation.Ourvisiononsustainabilityisadynamicone:asweprogressourviewswillevolveand,ifopportune,wewilladjustlongtermobjectivesandtargetsaccordingly.

ENGAGEMENT wiTH STAkEHOldERSWeconsideropenandtransparentcommunicationwithourstakeholderstobekeyinbuildingcredibilityontheissuesthatareimportanttoourbusiness.Wearethereforeincontinuousdialoguewiththedifferentstakeholdergroupsaswetrytodeepenourunderstandingofwhatsignificantstakeholdersconsidertobeimportantintheareaofsustainability.Manyofourcustomerswanttoengagewithusaboutissuesinthisareaonaregularandon-goingbasis.Themutualbenefitofthisdialogueisthatourcustomersvaluewhatourknowledgebringstotheirsupplychainsandweinturncantakeadvantageoftheirfeedbacktodriveoursustainabilityagendaforward.


Wealsoanalysedthesustainabilityreportingofagroupof30stakeholders,bothcustomersandsuppliers,toascertainwhichissuestheydeemtobeimportantintheareaofsustainability.Overall,onecanconcludethatthereisabroadoverlapbetweentheissuesthatSmurfitKappaconsiderstobeimportantandtheissueslistedbythisgroupofstakeholders.Moredetailofthisanalysiscanbefoundonpage12ofthisreport.Inaddition, asinlastyear’sreport,wefeatureshortinterviewswithrepresentativesfromourstakeholderbasehighlightingsustainabilityaspectsthatareimportanttothem.

PROGRESS ON OuR lONG TERM SuSTAiNABlE dEVElOPMENT COMMiTMENTSIn2012,goodprogresswasmadeintherealisationofourlongtermsustainabledevelopmentcommitments.fromfebruary2013onwards,over90%ofourconvertingoperationsworldwideareChainofCustodycertifiedunderfSCand/orPEfC,reachingoneofourcommitmentsonthesustainableuseoffibres,twoyearsaheadofschedule.Wearealsoclosetoreachingourother2015targetsunderthiscommitment.

RelativefossilCO2emissionsbyourmillsystemwerereducedyear-on-yearbyover3%partlyresultingfromthecompletionofspecificinvestments.Ourproduction-relatedCODdischargesarenowmorethan25%lowerthanin2005,and5%lowerthanin2011.OurBoardofDirectorsapprovedarevisedCodeofBusinessConductreflectingourcommitmenttoconductourbusinesstothehighestethicalstandards.Acomprehensiveawarenesscampaignin17languageswillbeinitiatedwiththeultimateobjectiveofensuringthatallouremployees arefamiliarwiththenewCodeandbehaveaccordingly.

SuSTAiNABlE GROwTH NEEdS ‘lEVEl PlAyiNG fiEld’ TRAdiNG CONdiTiONSAswehavestatedinpreviousreports,SmurfitKappa isfullypreparedtoplayitsroleinmeetingthesocial,environmentalandeconomicchallengesthattheworld isfacinginordertodevelopamuchneededsustainablegrowthmodel.forustodeliverourpart,itisnecessarythattheEUandthevariousgovernmentsinthecountrieswhereweoperatecreatefairandpredictabletradingconditions.forexample,theEU’sEmissionTradingSystemisatacrossroads.Eventhoughwefullysupportitsobjectivetocurbclimatechange,wealsowouldarguethattheabsenceofinternationalagreementsonglobalETSsystemsincombinationwiththeincreasedavailabilityofcheapfuelssuchasshalegasintheUSA,shouldnotresultintheEUcontinuingoreventighteningpoliciesthatwill,ineffect,resultininequitabletradingconditionsforenergyintensiveindustriessuchasours.WewanttheEUtoguideitsMemberStatestowardsbecominglesscarbonintensive,focusingonrenewableenergyandresourceefficiencywhileatthesametimemaintainingtheprincipleofagloballevelplayingfield. Inotherpolicyinitiativesconcerningtheuseofrawmaterials,theEUhastheresponsibilitytoensurethatourindustryhasaccess,ataffordableandcompetitiveprices,towood,recoveredpaper,andthecapacitytosecureadequateenergyandwatersupplywithoutdistortivetaxesand/orsubsidies.Undersuchascenario,wewillcontinuetodeliverourshareofsustainablegrowthbringingprosperitytoourstakeholdercommunities.

Ihopeyouwillfindthecontentofour2012SustainableDevelopmentReportbothinterestingandinformative,andlookforwardtoanyfeedbackthatyoumayhave.

Gary McGann GROUPCHIEfExECUTIVEOffICER 21June2013


TheBoardandManagementofSmurfitKappasupportthehigheststandardsofCorporateGovernanceandethicalbusinessconduct.Itisourviewthatacultureofhighstandardsofgovernancemustbepromotedfromthetopandmustbefosteredthroughoutthewholeorganisation.ThefollowingsectiondescribesinsummarytheGroup’sgovernanceatBoardlevelinsofarasitrelatestocorporatesocialresponsibility.ThefullCorporateGovernanceStatement,togetherwiththeDirectors’ReportandRemunerationReport,issetoutinthe 2012SKGAnnualReport.

SuSTAiNABiliTy GOVERNANCESustainabledevelopmentisacoreprincipleinallfacetsofSmurfitKappa’soperationsandactivities.TheBoardhasoverallresponsibilityforensuringthattheGroupplaysanappropriateroleinpromotingarealisticsustainabledevelopmentagendainthepaper-basedpackagingsector.ThedevelopmentandimplementationofSmurfitKappa’spoliciesinthisareaaresponsoredbytheGroupCEO.

Atexecutivemanagementlevel,aGroupSteeringCommitteesetsoutourstrategyandobjectivesforsustainabledevelopmentandreviewstheprogressmadeinmeetingourcommitments.ThiscommitteecomprisesthemostseniorexecutivesintheCompanyincludingthethreeexecutivedirectors(GroupCEO,GroupCOOandGroupCfO)andmanagementfromeachdivisionandfromtheGroupheadquarters.

TheGroupSteeringCommitteeissupportedby aSustainabilityWorkingGroupcomprisingkeyrepresentativesfromeachofthemainoperating divisionsinEuropeandtheAmericasaswellasGroupheadquarters.ThisGroup’staskistomonitortheachievementoftargetsacrossawiderangeofsustainabilityindicatorsandtopromotethethemeofsustainabledevelopmentinSmurfitKappa’sinterfacewithcustomers,suppliersandthegeneralenvironment.TheWorkingGroupisalsoresponsibleforthepreparationandproductionoftheAnnualSustainableDevelopmentReport.

ORGANiSATiON ANd REPORTiNGSustainabilityisembeddedintoouroperationsandreportingstructuresinvariousways.Thesustainabilityaspectsofourpackagingsolutionsandthebenefitstheycanbringtoourcustomersaretheprimemanagementresponsibilityofoursalesandmarketingteams,bothatcentralaswellasatlocallevel.Managingenvironmentalissuessuchasenergyandwater,andalsopeopleissuessuchashealthandsafetyandlocalcommunityinvolvement,aretheresponsibilityofthemanagement ofthelocaloperationsandthedivisionalmanagement towhomtheyreport.Reportingontheseaspectstakesplacethroughregularmonthlyand/orquarterlyreports tothevariousmanagementlevelsorthroughspecificreportingsuchasthereportingontheprogressmade onourlongtermsustainabledevelopmentcommitments.ABoardreportonoursustainabilityactivitiesincludingprogressoncertainindicatorsandtargetsispreparedtwiceayear.

COdE Of BuSiNESS CONduCT ANd GROuP POliCiESIn2012theBoardofDirectorsofSmurfitKappaapprovedarevisedCodeofBusinessConduct.Apartfromcoveringnewissuessuchasbriberyandanti-corruption,weworkedfromtheGroup’soriginalCodeofBusinessConduct,aswellasthevariousrelatedpoliciesandguidelines(e.g.EnvironmentalPolicyStatement,SocialCitizenPolicyStatement,ModelCode,etc.).Thenew Codeembedsthefundamentalprinciplesofallofthesepoliciesunderoneumbrellapolicycoveringhowweoperateethicallyasalargemultinational.TheCodewillalsobelinked,asapplicable,tothesedetailedpoliciesandguidelines.TheresultingCodeofBusinessConductandtheassociatedpoliciescoveringareasrelatedtoSmurfitKappa’smanagementandoperationsarebaseduponthefollowinginternationalconventionsandcodes:

1. InternationalLabourOrganisation(ILO)DeclarationonfundamentalPrinciplesandRightsatWork (coreconventions).

2. UNDeclarationonfundamentalHumanRights.

3. OECDGuidelinesforMultinationalEnterprises.

4. UNGlobalCompact.

CORPORATE GOVERNANCE


TheGroupensuresthatthekeycomponentsofinternalcontrolareinplacethroughtheimplementationofpoliciesandprogrammeswhichaimtodefineacceptablebusinesspractices,theresolutionofconflictsofinterestandtheexpectedstandardsofethicalbehaviour.WehavealsocreatedspecificpolicystatementsinkeyareasofsustainabilitythatareintegraltothedrivetoimproveSmurfitKappa’sperformance.ThesepolicystatementscoverEnvironment,Sustainableforestry,SustainableSourcing,SocialCitizenshipandHealthandSafetyissues.

AlloftheseCodesandpoliciesareavailableonourwebsitewww.smurfitkappa.com.

ETHiCAl STANdARdSOurCodeofBusinessConductprovidestheunderlyingmodusoperandiforeachandeveryemployeeineveryjurisdiction.Itsetsoutourpositioninrelationtocompliancewiththelaw,adherencetoethicalstandardsanditscommitmentstothosewithwhomitcomesincontact.

EachGroupcompanyanditsemployees,regardlessofgeographiclocation,arerequiredtoapplytheCodeandabidebytheparticularlawsandpracticesapplicabletotheirindustryand/orrequiredbythejurisdictioninwhichtheyoperate.

TheGroup’sCodeofBusinessConductmakesitclearthatpersonalandprofessionalintegrityistheresponsibilityofeachemployee.

ComplementingtheCodeofBusinessConductistheGoodfaithReportingPolicyStatement(‘WhistleblowerCode’)whichenablesemployeestoreportconcernsaboutpotentialwrongdoing.

TherevisedCodehasbeenpublishedonourwebsite andanawarenessprogrammehasbeeninitiatedin2012.Thiswillberolled-outGroupwideandincludesanappropriatetrainingprogrammeforcurrentand newlyrecruitedemployees.

AudiTSEachsignificantbusinessunitisthesubjectofanexternalandindependentfinancialauditconducted bytheGroup’sExternalAuditorsonanannualbasis.

Mostotherbusinessunitsarethesubjectoflocalstatutoryfinancialaudits.

OurInternalAuditDepartmenthasitsownextensiveworkprogrammeinthecontextoftheGroup’sfinancialRiskManagementSystem.Duringthecourseof2012,86detailedinternalfinancialandITauditswerecompleted.

Inadditiontotheseinternalaudits,alloperatingcountriesmustadheretotheGroup’sfinancialMonitoringPolicy.Thisincludescompletingriskassessmentanalysescoveringover50%oftheGroup’slargerfacilitiescarriedoutbyrelevantpersonnelfromwithineachcountry.

Thevariousauditsandanalysesincluderisksprimarilyrelatedtosignificantmaterialmisstatementoffinancialresults,deliberateorotherwise,arisingfromapoorcontrolframework.During2012,nosuchmisreportingwasidentified.

During2012,therewerenosignificantincidentsreportedwhichtheGroupconsideredtobenon-compliantwiththeCodeofBusinessConduct.

PuBliC POliCyAsamultinationalorganisation,ourbusinessesaresubjecttolegislationandrulesdeterminedbythejurisdictionsinwhichtheyoperate.

Inthatcontext,SmurfitKappaadoptspositionsonavarietyofmattersthatarerelevanttoitsbusiness,makingitsviewsknowntothepartiesconcerned,eitherdirectlyorthroughindustrybodiessuchastheConfederation ofEuropeanPaperIndustries(CEPI),theEuropeanfederationofCorrugatedBoardManufacturers(fEfCO)andtheEuropeanRoundTableofIndustrialists(ERT). ItalsoworkscloselywiththeIrishBusinessandEmployers’Confederation(IBEC)andequivalent bodiesinothercountries.

AtalltimesthoserepresentingtheviewsofSmurfitKappadosohavingdueregardtoitsCodeofBusinessConductandthelocallawsandregulationsapplyingtotheGroup’soperations.TherewerenosignificantcriticismsoftheGroupinthisrespectin2012.InlinewiththeGroup’sCodeofBusinessConductnofinancialcontributionsweremadetopoliticalpartiesin2012.NonationalgovernmentisadirectshareholderinSmurfitKappa.

COMPliANCEItisGrouppolicytocomplyatleastwiththeapplicablelawsandregulationsineachofthecountriesinwhichitoperatesandtoensurethatitsemployeesareawareofthisandconductthemselvesappropriately.NosignificantfineswereimposedontheGroupin2012inrespectofanybreachesofsuchlawsandregulations.


ENGAGEMENTWITH STAKEHOLDERS

OuR STAkEHOldERSWeconsideracontinuous,openandconstructivedialoguewithourvariousstakeholdergroupsinallcountriesandareaswhereweoperatetobeofkeyimportance.Webelievethatfrequentinteractionwith ourstakeholdercommunitiesoffersusagreatopportunitytoimproveanddevelopourselvesinallaspectsofsustainability.Bydoingsoweaimtomeetand,wherepossible,exceedourstakeholders’expectations.Ourstakeholdersarecrucialtotherealisationofoursustainabilityobjectiveswhethertheirconcernsareenvironmental,socialoreconomic.

Weconsideranypersonorentitywithwhomweengagetobepartofourstakeholdercommunity.ThisrangesfromanysmalllocalcustomerorsuppliertolargemultinationalcompaniesorNGOs.Manystakeholderinteractionssuchasmeetings,fairs,communityvisits,publichearings,openhouseeventsorothereventsorganisedby,orfor,stakeholderstakeplaceatalocallevelwhereourteamsinteractonadailybasiswithcustomers,suppliers,employeesandlocalauthorities.Wealsoreceivestakeholderfeedbackthroughcustomersatisfactionsurveys,dialoguewithtradeunionsandemployeequestionnaires.

AllourstakeholderrelationsareguidedbyourCodeofBusinessConductandrelatedpolicystatementssettingouttheprinciplesthatallSmurfitKappaemployeesareobligedtofollowintheirrelationswithstakeholders.MoreinformationaboutthisCodeisgivenonpage9.

Thedifferentstakeholdergroupswerecognisearelistedoverleafandasummaryofhowweengagewiththemisprovided.Shortinterviewswithrepresentativesofdifferentstakeholdergroupsareincludedthroughout thereport.

MEMBERSHiPS iN ORGANiSATiONSAspartofourinteractionwithvariousstakeholdergroups,webelieveitisimportanttobeanactiveparticipant,amember,asignatoryortobeotherwisesupportiveofassociations,topicalinitiatives,advocacygroupsandinstitutionsthatrepresentorbringtogetherrelevantstakeholdergroups.Thevalueoftheseorganisationsforuscanbesignificant.Thisrangesfrom

representationtopolicymakersaspartofanindustrygrouptohavingaccesstorelevantindustrystatistics. Oureffortsinthatregardfocusonnationalandinternationalindustryassociationssuchas:

nCEPI,atGrouplevelandthroughvariousnationalpapermanufacturerassociations,

nfEfCO,atGrouplevelandthroughanumberofnationalcorrugatedmanufacturerassociations,

nCEPIContainerboard,

ntheInternationalCorrugatedCasesAssociation(ICCA)and,

ntheEuropeansackkraftmanufacturers’association(Eurokraft),

nACCCSA,AsociacióndeCorrugadoresdelCaribeCentroySurAmérica.

Besidescontributingtotheseassociationsthroughannualmembershipfees,severalseniorSmurfitKappaexecutivesareboardmembersofCEPI,CEPIContainerboardandfEfCO.Also,representativesofSmurfitKappaaretypicallyinvolvedasactiveparticipantsincommittees,issuegroupsandtaskforcesonspecifictopicsofinteresttotheseassociations.

SmurfitKappaisalsoactivelyinvolvedasamember of,participantinorasasignatorytoanumberoforganisationsactiveintheareaofenvironmentalreportingandsustainability.Theseinclude:

ntheCarbonDisclosureProject(CDP),

ntheSupplierEthicalDataExchange(Sedex),

ntheWaterfootprintNetwork(WfN)

ntheProgrammefortheEndorsementofforestCertification(PEfC)

ntheforestStewardshipCouncil®(fSC®,until2013viaourColombianorganisation,since2013alsofromourGroupoffice)

ntheWorldBusinessCouncilforSustainableDevelopment(viaitslocalchapterinColombia).

nTheUNGlobalCompact(seealsopage92).


Customers Aswellasthenormalbusinessinteractionthatonewouldexpect,wearecontinuouslyintensifyingourengagementwithourcustomersandinturntheircustomers(e.g.retailers)onkeysustainabilityissues.Importantareasofinteractionaresustainablefibresourcing,carbonfootprintandsocialcompliance.Theseinteractionswithcustomerscouldbeintheformofworkingtogetheronspecificprojectsinsustainability,attendingcustomerconferencesorsupportingcustomerswiththeirspecificsustainabilityinitiatives.

Employees Ouremployeesarethekeytooursuccess.Weplacesignificantemphasisontheirsafety,healthandwell-being.Therearenumeroustrainingactivitiesforouremployeesrangingfromtrainingonthejobtoadvancedmanagementcourses,bothinternalaswellasexternal.Thereisextensiveinteractionbetweenourmanagementandrepresentativesofouremployeesthroughthevariousemployeerepresentativebodies.WerevisedourCodeofBusinessConductreflectinghowweconductourbusinessandtheimportantroleouremployees playinthat.

Investors Thereisanextensiveprogrammeinvolvingroadshowsandinvestordayswhereanalystsandinvestorshavetheopportunitytoengageindialoguewithsenioroperatingmanagement.One-on-onemeetings,telephoneconferences,andparticipationinindustry-relatedinvestorconferencesalsoformpartofourinvestorrelationsinitiative.

Suppliers Aswellastheusuallevelsofcommunication,therearespecificinitiativessuchasauditsandquestionnaires.ThereisspecificfocusonChainofCustodycertificationofourpapersuppliers.SupplierprogrammesareinplacethatrequireoursupplierstodeliverinconformitywithourSustainabilitySourcingPolicy.SmurfitKappa’soperationsarerequiredtosourceproductsandservicesfromlocalsupplierswherepossible,consistentwiththeneedtoensureappropriatequalityattherightpriceandsupportforsustainability.

nGOs Membershipsof,orparticipationsin,organisationslikeforestStewardshipCouncil(fSC),ProgrammefortheEndorsementofforestCertificationSchemes(PEfC),theSupplierEthicalDataExchange(Sedex),CarbonDisclosureProject(CDP)andWaterfootprintNetwork.Dialogue,bothdirectandindirect,(throughmembershiporganisations)andcooperation onspecifictopicssuchaswaterandCO2 sequestration.

local communities

Weengageinsocialprojectsandhealth,employmentandenvironmentalinitiativesinthecountriesinwhichweoperate.InLatinAmerica,inparticular,therearesomeextensiveprogrammesinvolvingsignificantexpenditureandouremployees’timeandexpertise. Theaimistoassistcommunitiesinself-help.TheSmurfitKappaGroupfoundationtargetssocialresponsibilityinitiativesinthosecountriesinwhichSmurfitKappaoperates.

Government and society

Membershipofindustryassociationsatnationalandinternationallevel,participationinforumsrelatedtobroaderbusinessissuesandsocietyingeneral

Membershipoforparticipationinsuchorganisationsisnotpassiveandcustomarilyinvolvesprovidingthemwithasignificantamountofinformationonouroperations,usuallyintheformofadetailedquestionnaire.

TheGroupCEOisamemberoftheEuropeanRoundTable,aforumofapproximately50chiefexecutivesand/orchairmenofmajormultinationalcompaniesof

Europeanparentagecoveringawiderangeofindustrialandtechnologicalsectors.

SmurfitKappa’ssubsidiarycompaniesarealsomembersofalargenumberofnationalindustryandbusinessassociationsinbothEuropeandLatinAmerica.


mateRiality

OurobjectivewhendeterminingmaterialityistoidentifythoseissuesofsignificanceforSmurfitKappa.Thesecanthenformthebasisofourworkinsustainability.

Inpreparingthisreport,weidentifiedrelevanttopicstakingintoconsiderationtheGlobalReportingInitiative(GRI)guidanceonmaterialityandcompleteness.WealsousedourownCodeofBusinessConduct,generaltrendsinthemarketplaceandregulatoryandcompliancedriversasinputfortopicidentification.Aswellasthenormalinteractionsonewouldexpect,wealsointerviewedrepresentativesfromthedifferentstakeholdergroups fortheirspecificinput.Theseinterviewscanbefoundthroughoutthereportandprovideexamplesofissuesthatareimportantforourstakeholdersasawhole.furthermore,weperformedananalysisofthetopics thatarematerialforagroupofrelevantstakeholders.

Theinputfromthedifferentstakeholdergroupswasparticularlyusefulinhelpingustorefinetheconceptofmaterialityandenabledustofocusonthesustainabilityissuesthatwebelieveourstakeholdersfindimportantforustobothworkandreporton.

Theseanalysesandinteractionsresultedinanextensivelistoftopicsthatcanbeclassifiedunderfourmainheadings:

I. environmental,II. social,III. economicandIV. general.

Individualtopicsweincludeundereachoftheseheadingsarehighlightedinthegraphbelow.

forthisyear’sreportwestudiedthematerialityanalysisofagroupof30companiesthatweconsiderimportantorrelevanttousincludingcustomers,suppliersandpeersandcompaniesthatinotherwaysarerelevanttous.Issuesthatarematerialforourcustomersand/orsuppliersareconsideredtobe(potentially)materialto usaswell.Asafirststepweanalysedhowmanyofthecompaniesperformedamaterialityanalysisandwethenanalysedthefrequencywithwhichmaterialissueswerementionedorhighlighted.Weconsideredthatthefrequencywithwhichatopic/issuewasmentionedas anindicatoroftheimportanceofthattopic/issuefor theinvestigatedgroupofcompanies.ThegraphbelowreflectsthatinterpretationwhilealsoindicatingthesignificanceoftheseissuestoSmurfitKappa.

Issuesasshownhereunderareplottedaccordingto theGRIguidelines.

Significance of Indicators for Smurfit Kappa

leve

l of

inte

rest

of

stak

ehol

ders

SocialTopics EconomictopicsGeneralTopics EnvironmentalTopics

TalentAttraction &Retention

WorkforceTraining &Development

EmployeeRelationsWasteManagement

Certification

foodContactandfoodSafety

RelationswithCustomers

ProductDevelopment&Innovation

StakeholderEngagement

Transparency

CompliancetoLaws

Business Ethics&Values

CorporateGovernance

WaterIntake &DischargeLandUse

Biodiversity

CommunityDevelopment &CommunityRelations

ClimateChange

HealthandSafety

EnvironmentalIncidents

EnergyUsage

Suppliers&Contractors

ChildLabour&forcedLabour

Non-discrimination&Diversity

Sustainableforestry

Emissionsdue toTransportation

RawMaterialAvailability


STRATEGy

TheGroup’sobjectiveistodeliversuperiorperformanceintermsofprofitabilityandreturnsoncapitalthroughthecycle,therebyenhancingshareholdervalue,andtobethemarketleaderinpaper-basedpackaging initschosenmarkets.Thisobjectiveisunderpinnedby afocusondeliveringsuperiorcustomersatisfaction,arelentlesspursuitofcostandoperatingefficiency,proactiveenvironmentalawareness,andacommitmenttothepersonaldevelopmentofemployeesandcontinuousimprovementintheareasofhealth andsafetyandcorporatesocialresponsibility.

THE GROuP’S OBjECTiVES ANd STRATEGiES ARE:ToprofitablybuildonitsmarketpositionsinEuropeandintheAmericasthroughselectivefocusedgrowth,including:

norganicgrowthfromincreasedmarketsharethroughconsolidating,andwhereappropriate,extendingitsleadershippositioninWesternEurope.ThiswillbeachievedbyleveragingtheGroup’srelationshipswithitscustomersacross itsbroadproductrangeandenhancingitsprofitabilitybymaximisingsynergiesandoptimisingthecostbase;and

nacquisitionandmergerbasedgrowthinareaswheremarketshareand/orcoveragefacilitatesit,particularlyinthehighergrowthmarketssuchasEasternEuropeandLatinAmerica.

Tofocusonenhancingitsoperationalexcellence, therebycontinuingtoimproveitscustomeroffering,bycontinuouslyupgradingitsproducts,processes,services,qualityanddeliveryinallmarketsby:

nleveragingtheGroup’sincreasinglyhighqualityassetbasethroughcontinuousimprovementprogrammes,transferofbestpractice,industrialengineering,innovationandtargetedcapitalinvestment;and

nincreasingtheproportionofadded-valueconvertingproductsintheoverallportfoliothroughtheuseoftheGroup’sdevelopmentandtechnologycentres,itsinnovationtoolsanditspan-Europeannetworkingreatervalueareassuchashighqualityprinting,displayandlitholamination;and

nensuringthatitsoperations,whetherintheconvertingormilldivisions,continuetobeclosetotheircustomersandhaveaclearmarketfocusratherthanbeingproductiondriven.

Tofocusoncashflowandappropriatereturnsoninvestmentinordertomaximiseshareholdervalue.

TosecureandretaintheoptimalbalancebetweendebtandequitycapitaltofacilitatetheGroup’sgrowthstrategyinacyclicalindustry,whilestrikingtheappropriatebalancebetweenriskandreturn.

Bert Mik - Smurfit Kappa Solid Board, Netherlands.


InDecember2012,SmurfitKappaacquiredOrangeCountyContainerGroup,whichisanintegratedpaperboardandpaper-basedpackagingmanufactureroperatingwithinnorthernMexicoandthesouthernUSA.Thecompany,whichhasbeenrenamedSmurfitKappaOrangeCounty(“SKOC”),producesrecycledlinerboardandcorrugatingmediumatitsfacilityinforney,Texasandawiderangeofcorrugatedandfoldingcartoncontainersandpoint-of-purchasedisplaysinanumberofconvertingoperationsinnorthernMexicoandCalifornia.SKOCalsooperatesrecoveredpapercentresinTexas,Oklahoma,andArkansas.

fromasustainabilityperspectiveSKOC’soperationsareChainofCustodycertifiedundertheforestStewardshipCouncil(fSC)andtheSustainableforestryInitiative(SfI).SKOC’sconvertingoperationsproducerecyclablepackagingsolutionsandhavepackagingonofferwithaspecialfocusonsustainabilityaspects.Itsforneypapermakingfacilityisoneofthelargestproducersof100%recycledcontainerboardintheUnitedStates,producingcurrentlyaround300,000tonnesofrecycledpaperontwopapermachinesperyear.

Theforneyfacilityoperatesawood-firedbiomassboilercombustingwoodchipsthatarebasedonwastewoodpurchasedfromthirdparties.Thewoodchipswouldotherwisebelandfilledortrenchburned.forneyalsohasaCHPonsite.Asignificantpartofforney’senergyconsumptionin2012wasbasedonrenewablesourcesandmorethan30%ofitselectricityneedsweregeneratedonsiteaswell.

Acquisition of Orange County Container Group further strengthens Smurfit Kappa’s position in Mexico and USA

Aerial view of the Forney paper mill, Texas, USA, part of the Orange County Container Group which was acquired by Smurfit Kappa at the end of 2012.


Ourobjectiveistobeacustomer-oriented,market-ledcompanywherethesatisfactionofcustomers,thepersonaldevelopmentofemployeesandrespectfor ourlocalcommunitiesandtheenvironmentareseenasbeinginseparablefromtheaimofcreatingvalueforourshareholders.Weseesustainabilityasaplatformthatwillhelpustoreachourobjectives.Itisthereforeanintegralpartofouroperationsandpartofourdailybusinesslife.Inourview,sustainabilityisnotaboutcorporatealtruismbutmakesperfectbusinesssenseasitcanhelpusgrowourbusiness.

OuR COMMiTMENT ANd APPROACHSustainabilityforSmurfitKappaisaboutimprovingthequalityoflifetodayandinthefuture,forpeopleand forourplanet.Itiswhatwedoandalwayshavedone:sustainabilityisaboutsatisfyingcustomerswithcreativeandinnovativeproductsandservicesthatextendthelongevityofproducts,usingresourcesandmaterialsresponsiblythroughourforestryandrecyclingbusinesses,providingsafeworkingenvironments,caringforourpeople,workingtobenefitthelocalcommunitiesandprotectingourreputation.Wetakeourresponsibilitiesinsustainabilityseriouslyandcaredeeplyabouttheenvironment,ourpeopleandthecommunitieswherewework.

Theaboveimpliesaclearcommitmenttothethreeimportantsustainabilityelements:Planet, PeopleandProfit.Ourapproachtothesethreeelementsisasfollows:

nEnvironment–weoperateinanenvironmentallysoundmanner.

nPeople–wearesociallyconsciousandpro-active.

nBusiness–weremaineconomicallyviable,doingbusinessonanethicalbasis.

IndoingsowewillensurethatthesocialandnaturalenvironmentwithinwhichSmurfitKappaoperatesisrespectedandprotectedbothtodayandintothefuture.TheGroupprovidesdirectincometoapproximately41,000people(includingSKOC)andindirectly(viaitssuppliers)toatleastthesamenumber,anditcontinuestocarefullyuseandrecycleawiderangeofnaturalresources.

1. ENViRONMENTforthefirstimportantelement–Planet–wetakeaspecialinterestinsafeguardingtheenvironmentasourproductsarecomposedofmaterialsthatarenaturalresourcebased,recyclableandpredominantlymade fromrecycledmaterial.Wecommittodosonotonlyinoperatingourfacilitiesbut,atleastasimportantly,indesigninganddevelopingpackagingsolutionsforourcustomersthatimprovetheirenvironmentalperformance.

Packagingispartofthecomplexsystemofdeliveringproductsfromwheretheyareproducedtowheretheyareconsumed.Ourpackagingproductsareusedtocollect,store,transport,distribute,preserveandmarketgoods.Becauseofthesefunctionspaper-basedpackagingmakesapositiveenvironmentalimpactbypreventingproductsfrombecomingwaste.Researchsuggeststhatourproducts,ifproperlydesignedandapplied,candecreasethecarbonimpactofaspectsofourcustomers’supplychainsbyconsiderablymorethanthecarbonimpactourownproductshave.

Inourdrivetosafeguardtheenvironmentwearecommittedto:

nComplyingwithnationalandinternationalenvironmentallegislation.

nApplyingappropriateenvironmentalmanagementsystemsthroughouttheGroup.

nUsingnaturalresourcesasefficientlyaspossible.

nAchievingbestpracticeinenvironmentalmanagementthroughthefocusoncontinuousimprovementprogrammes.

nMeetingthereasonableexpectationsofstakeholdersconcerningenvironmentalperformance.

nDrivingtheentirepapersupplychaintoreduceitsenvironmentalimpact.

nSupportingourcustomerstoreducetheenvironmentalimpactoftheirsupplychains.

2. PEOPlEforthesecondsustainabilityelement–People –ourprimaryfocusisonthesafety,well-beinganddevelopmentofallouremployees.Wedosobypermanentlyinvestingintheirsafetyatworkthroughtrainingandsafetyequipment,byprovidingthemwithchallengingandsatisfyingjobsandbyofferingcareeropportunities.Ourotherkeyfocusisonthelocalcommunitieswherewehavetheprivilegetooperate.Ouroperatingfacilitiesarefrequentlylocatedincommunitieswhereweareseenasanimportantpartnerinthelocaleconomy,providingjobstoouremployeesandbusinessforlocalsuppliers.Ourmanagersareencouragedtherefore,toactivelyparticipateininitiativesat thelocalcommunitylevel.

OuR COMMiTMENT ANd APPROACH TO SuSTAiNABlE dEVElOPMENT


AsaGroupwearecommittedto:

nEnsuringthatforhealthandsafetystandards,allouroperationscomplywithlocallegislationandwithbestinternationalpractice.

nApplyingtheprincipleofequalemploymentopportunities.

nManagingourbusinessinanethicalandequitablemannerandmeetingallofoursocialresponsibilities.

nEnsuringthatemployeesandsuppliersareawareoftheGroup’spolicyonsocialresponsibility.

nProtectingandadvancinghumanrights,particularlythoseoftheindigenouscommunitieswherewehaveoperations.

nPromotingandenhancingstrongrelationshipswiththecommunitieswithinwhichourbusinesseshavetheprivilegetooperate.

3. BuSiNESSforthethirdsustainabilityelement–Profit–wehaveaverysimplephilosophy.Weneedprofitablegrowthtorewardourstakeholdersandtocontinueourdriveforsustainability.Duetothenatureofourbusiness,weseemanyopportunitiestocombineboththeneedforprofitablegrowthwiththeopportunitytoadvancethevarioussustainabilityprinciples.Weconsidersustainabilitynaturaltoourbusinessandtobeakeybusinessdriver.Weseesustainabilityasadifferentiatingfactorinthemarketanditisanintegralpartofourbusinesscommitmentandproductoffering.

AsaGroupwearecommittedto:

nMeetingshareholders’andotherstakeholders’expectationswithregardtoprofitable,sustainablelongtermbusinessdevelopmentinthechanginglocalandglobaleconomies.

nWorkingcloselywithanddemonstratingleadershiptocustomersandotherstakeholderswhenitcomestodevelopingandprovidingpackagingsolutionswithreliablesustainabilitycredentials,takingaccountoffactorssuchaspackagingoptimisation,recyclabilityandChainofCustody.

nSupportingcustomers,suppliersandothersinthesupplychainontheirownsustainabledevelopmentprojects.

nProvidingpackagingsolutionsthatimproveourcustomers’environmentalfootprint,e.g.byminimisingcustomers’productwastageandoptimisingdistributionandtransportationrequirements.

nInvolvingouremployeesindevelopingmoresustainableandinnovativepackagingsolutionsbyrewardingandhonouringtheminaGroup-widecompetitionofInnovationandSustainabilityAwards.

Whendealingwiththeenvironmental,socialandbusinessaspectsoftheGroup’ssustainabilityprogrammes,wearecommittedto:

nAsaminimum,complyingwithallstatutory,regulatoryandlegalrequirements.

nMaintainingcodesofbusinessconductthatsupportourcorevaluesofintegrity,responsibilityandrespect,whenmanagingourbusinessactivities inalllocations.

Werecognisethatfactorssuchasethicalbehaviour,transparencyingovernancestandards,identificationofrisksandstakeholderengagementarefundamentalforthesustainablesuccessoftheGroup.OurobjectiveistocontinuouslyprogressSmurfitKappa’srecognitionasatrulyresponsiblecompanybyallstakeholdersandotherparties.Intheremainderofthisreportinformationisprovidedonhowwesubstantiateourcommitmentsandapproachtosustainability.

Our Commitment and Approach to Sustainable development [continued]

Rosario Nielsen from Smurfit Kappa Dyboflex in Denmark.


Sustainabilityhasbecomeoneofourkeybusinessdrivers.Throughourpackagingsolutions,wenotonlyprovidemarketingandretailreadypackagingtoourcustomers,wealsohelptooptimisetheirsupplychainsandtominimisewastebysecuringthedurabilityofproducts.Thelattertwoarebothcriticalconsiderationsinaworldwherethesupplyofnaturalresourcesisfinite.Therefore,efficientandsustainableuseofresourcesisoneofourkeyobjectives.Thishelpstomitigateclimatechangeandlimits,asmuchaspossible,otherenvironmentalimpactsonairandwatersystems.fromourmaterialityidentification,weconcludedthatforstakeholdergroupssuchascustomers,suppliersandNGOs,theefficientandsustainableuseofnaturalresourcesisalsoakeyconsideration.

Themainresourcesweneedinourprocessesarewoodandrecoveredpaperasrawmaterials,andenergyandwaterforthemanufacturingprocessofpaperandboard.

Anothercriticalelementofourbusinessisthatourpackagingsolutionsarefitforuseinfoodcontactapplications.foodsafetyisthereforeakeyconcern forusaswell.

Inthisdynamicbusinessenvironment,risksandchallengesregardingtheissuesoffibreavailability,costofenergy,regulationconcerningCO2emissionsandfoodsafetyarethereforekeyissueswhichweandourindustryfaceasawhole.

1. fiBRE AVAilABiliTyfibresfromwoodandrecoveredpaperarethefundamentalrawmaterialsweneedandtheiravailabilityatcompetitivepricesiskeyforourbusinessandindustry.Sustainableforestryandwell-functioningpaperrecoverysystemsareofparamountimportanceforcompaniessuchasSmurfitKappa.

Variousfactorsinfluencethepotentialavailabilityoffibreforourbusiness.Thesefactorsrangefromtheneedforalowcarbon,resourceefficienteconomy,andthecostofenergytopoliciesadoptedbytheEUontheneedfortheuseofrenewableenergy.Alsomoregeneralfactorssuchaspopulationgrowth,changingconsumerpatternsandfoodscarcitycanalsohaveanimpact.

forecastedglobalpopulationgrowthandhigherstandardsoflivingdemandactiontosecurefutureavailabilityofsufficientquantitiesofwoodfibreforitsvariousapplications.Ourindustryfacesanumberofchallengesinthisrespect.Needforlandandwatertofeedanincreasingpopulationmaylimitlandavailabilityforgrowingwoodwhilenewapplicationsfortheuseofwoodfibresinthebiochemicalindustrymaylimitfibreavailabilityforpapermaking.Ontheotherhand,populationgrowth andtheinherentneedtodecreasefoodwaste,towhichpackagingispartofthesolution,willincreasethe demandfor(paper)packaging.

Ofparticularconcernisthepotentialeffectofthe2020EURenewableEnergyPolicytargetsontheavailabilityofourrawmaterials.Existingsubsidyschemesforwoodasarenewablefuelfeedstockareofconcern,asthisdrivesupthepriceofourrawmaterials,negativelyimpactingthecompetitivenessofourindustryincomparisonwithalternativepackagingmaterials.Westronglyfavourtheconceptofresourcehierarchy,withpolicysupportfor thehighestaddedvalueapplicationsforfibresuchasproducingpaperoverloweraddedvalueapplicationssuchasthermaluse.

AnotherreasonforadheringtothishierarchyisthefactthattheEuropeanpaperindustryisalreadythesinglelargestuserandproducerofbio-energy,withfurtheruntappedpotentialasisshownintheforestfibreIndustry2050Roadmaptoalowcarboneconomy ‘Unfoldthefuture’.

Ourriskconcerningwoodfibreavailabilityismitigated byourownershipofforestryinLatinAmericaandtherelationshipswehavewithkeysuppliersofwoodin bothEuropeandLatinAmerica.

Paperfibrescanberecycledbetweensixtoninetimesandtheuseofrecovered(paper)fibrestoproducenewpaperandboardisanimportantcontributortothesustainablenatureofourproducts.Recoveryofusedpaperisaglobalnecessityandnationalandinternationalpoliciesshouldstimulatesettingupwell-functioningpaperrecoverysystems.

Weexpectthatglobalcollectionrateswillcontinuetoincrease.InEurope,collectionrateshavereachedonaverageover70%,withthehighestadditionalpotentialforrecoveredpapercollectioninEasternEuropeancountries.AccordingtoResourceInformationSystemsInc.(RISI),aleadinginformationproviderfortheglobalforestproductsindustry,globaldemandforrecoveredpaperincreasedbyapproximately70milliontonnes(45%)inthelastdecade(2001-11).Morethan75%ofthatincrease(approximately60milliontonnes)originatesfromAsiancountries,suchasChinaandIndia,wheredemandforrecoveredpaperincreasesfast.TheseAsiancountriesdependtoalargeextentonrecoveredfibreimportsduetolackoforlagginglocalrecoverysystems,puttinganupwardpressureonglobalrecoveredpaperpricing.

Thequalityofrecoveredfibresisdeterioratingastheamountofrecycledpaperisgrowing.freshfibreinflowintothepaperproductionandrecyclingsystemisthereforeanecessity,whichisanotherreasonwhytheabovementionedhierarchyofbiomassuseisimportant. Toensurethefutureavailabilityofsuitablerecoveredpaper,governmentsandindustrycollectivelyneedtocontinuetheirdrivetoincreasecollectionrates.

kEy RiSkS ANd CHAllENGES


key Risks and Challenges [continued]

Asforwoodfibres,itisalsooftheutmostimportancethatrecoveredpaperisfirstusedforproducingpaperandboardandonlyattheendofitslifecycleshouldfibres beusedasfuelforenergygeneration.

Ourriskconcerningrecoveredpaperavailabilityismitigatedbyourpositioninthesupplychain,throughourownrecoveredpaperoperationsandlongtermsupplyagreementswithkeysuppliers.

2. COST ANd SuPPly Of ENERGyEnergypoliciesmustfocusonsecurityofsupplyatcompetitivepriceswhilemitigatingenvironmentaleffects.Thedifferencesinthecostofenergyinvariouspartsoftheworldareofincreasingconcerntous.Ourprocessesarebytheirnatureenergyintensiveandthecostofenergythereforeisanimportantcompetitivefactorgloballyaswellasincomparisonwithalternativepackagingmaterials.Globally,energycostsaredropping.InEurope,energycostsarekeptathighlevelsduetopoliciesthataddsignificantlytothepriceofenergy itselfsuchascostsfortheuseofgrids,subsidiesforrenewablesandotherlevies,whichinanumberofcountrieshaveoutgrowntheproductioncostsofenergyitself.ThisisdirectlynegativelyimpactingthecompetitivepositionofEuropeanindustryingeneral.

Anotherconcernistheapparentshiftintheuseofcertaintypesofenergy.Thenearnucleardisaster,resultingfromthetsunamiinfukushimainJapaninMarch2011,hasmotivatedtheGermangovernmenttomoveawayfromtheuseofnuclearenergy.IncombinationwiththeshalegasdiscoveriesinCanadaandtheUnitedStates,theglobalenergy‘landscape’haschangedsignificantlyinarelativelyshortperiodoftime.Shalegasandshaleoilareexpectedtobringenergyself-sufficiencytoNorthAmericaintheforeseeablefuture.Ithasalreadyledtoadecreaseinenergycosts(notablynaturalgas)forUnitedStatesindustryandledtotheexportofcoalfromNorthAmericatoEurope.Thisdevelopmentismakingtheuse ofcoaleconomicallymoreattractiveinEuropewhileenvironmentallyithasagreaterimpactthantheuse ofnaturalgas.

WithinEuropethisdevelopmenthasled,incombinationwiththegrowinguseof(subsidised)renewableenergy, toasituationofovercapacityofenergysupply.Gasfiredpowerplants,includinggasfiredcombinedheatandpowerinstallations(CHP),can,incertainmarketconditions,nolongercompeteagainstsubsidisedrenewablesandtheuseof(imported)cheapcoal.ThisdevelopmentisofconsiderableconcerntousaswewhohavemadesignificantinvestmentsingasfiredCHPinstallationsonthebasisoftheirhighenergyefficiencyandtheirrelativeenvironmentalfriendliness.

ThesedevelopmentsarecreatingsignificantchallengesforouroperationsinEuropeinparticular.Tomitigateourrisksconcerningcostsandsupplyofenergy,wefocusoureffortsonfurtherincreasingenergyefficiencyandtheuseofbiomasswhereeconomicallyfeasible.WealsosupportourEuropeanindustryassociationCEPI,aswellastheERT,intheiradvocacyforcompetitivecostsofenergysupplyinEurope.

3. CliMATE POliCy iMPACTEuropehastakentheleadinaddressingtheimpactofCO2 emissionsonclimatechange.ApartfromAustralia,onlyEuropeancountrieshaveacceptedbindingcommitmentsforthesecondperiodoftheKyotoProtocol.Globalnegotiationsonafutureclimateregimeareduetostart in2015withaformalagreementanticipatedby2020.

SmurfitKappasupportsglobaleffortstocurbclimatechangeifandwhenagloballevelplayingfieldisestablished.WebelievethatEuropeanpoliciesregardingclimatechangeshouldnotbetightenedintheabsence ofinternationalagreements.ThecurrentETSIIIsystemisfunctioningwelleventhoughthepriceofcarbonisnotattheexpectedlevelsasforeseen.Inourview,thisispartlytheresultoftheinvestmentstheEuropeanindustryhasmadeinenergyefficient,non-fossilfuelledequipment.

WerecommendthattheEUgivesprioritytoprovidingguidancefortheperiodbeyond2020onhowitintends torealisetheobjectivesenvisagedinits‘Roadmapformovingtoalow-carboneconomyin2050’.Itisalsoofparamountimportancethatthebiomassusedbytheforestproductsindustryremainsuntouchedasbillions ofeuroshavebeeninvestedovertimeinbiomassboilersthatoperatemostlyonresidualssuchassawmilldust,bark,blackliquorandstumps.

WehavemadesignificantstepsinreducingourCO2 emissionsandhavebeeninstrumentalinsettingindustrybenchmarksthatarethebasisforfreeallocationofcarboncreditstoourindustryinthe2013-2020tradingperiod.GiventhealreadydisadvantageouspositionenergyintensiveindustriesinEuropehavevis-à-vistheircompetitorsinotherpartsoftheworld,webelievethattheso-called‘carbonleakage’statusofourindustryinEuropemustbemaintainedfortheremainderoftheETSIIIperiod.

Tomitigateourrisksconcerningclimatepoliciesimpact,wefocusoureffortsonreducingspecifictypesofenergyusageandwearealsoaimingtoreducegreenhousegasemissionsbyinvestinginmoreenergyefficientsystemssuchasCHPplants,alternativeenergyoptionssuchastheuseofbiomass,andbydrivingproductionefficiencies.


4. wATERWateravailabilityandtheimpactofourwaterusage ontheenvironmentarekeyissuesforus.Sufficientavailabilityofgoodqualitywateratanaffordablecost isfundamentalforanindustrylikeours.freshwateravailabilityisclearlyagrowingconcernforcertainareasoftheworld.Althoughthevastmajorityofourfacilitiesarelocatedinareaswherefreshwateriscurrentlysufficientlyavailable,asaGroupwearecommitted toreduceourwaterusagewherefeasible.

Asaconsequenceofthegrowingconcernregardingfreshwateravailability,webelievewaterpolicymakerswillincreasetheirfocusontheconsumptionofwaterandthetreatmentofwastewater.Wetreatwastewaterasaresourcecontainingvaluethatshouldberecuperatedbeforethewaterisreleasedtothepublicwaterbodyincompliancewithlegislation.Wealreadyretrievevaluablebiogasfromwastewatersludgeandwearedevelopingourinsightsonhowtorecoverotherresourcesfromwastewaterflows.

Chemicalswillbere-evaluatedfortheirimpactonwastewaterflows.Limitationstoemissionstowatermayalreadyarisefromthefinalisationoftheso-calledBestAvailableTechnologiesReferencedocument(BREf)bytheEuropeanCommissionthisyear,withstricterlimitsonAOxandnutrientsinwastewaterflows.

Since2008thewaterintakeofourpaperandboardmillsystemhasdecreasedby10%pertonneofproduct.Although,aswithotherpaperproducers,weprocesslargevolumesofwater,thepaperindustrydoesnotactuallyconsumeasignificantvolumeofwater.Aftertreatmentinmodernwatertreatmentplants,over90%ofthewaterintakeisreturnedtothewatersystemsfromwhichitwasextracted.Wearethereforestronglycommittedtofindwaystofurtherimprovewaterusageefficiencyandtoimprovethequalityofthewaterreturnedtotheenvironment.Since2005wehaveachievedareduction ofover25%intheorganicload(COD)dischargedwiththeeffluents.Wearecommittedtocontinuingourambitiousprogrammeforreducingtheimpactofouractivitiesonwater.

Wealsosupportinitiativesthatdevelopmethodologies tocalculatewaterfootprintaccounting,waterfootprintimpactassessment,andwaterstewardshipstandards.WeareapartneroftheWaterfootprintNetwork(WfN)whichisafrontrunnerindevelopingsuchstandards.WearealsocloselymonitoringtheupcomingISOstandardonwaterfootprintingandtheworkoftheAllianceofWaterStewardshipandEuropeanWaterPartnersviaourindustryassociationCEPI.

5. fOOd CONTACT ANd fOOd SAfETyInouropinion,itcanbeobjectivelyproventhatpaper-basedpackagingisthemostsustainableformoftransportanddisplaypackagingforfoodproducts.Itisacleanandhygienicproductusedforonlyonedelivery.Thechallengeourindustryfacestomeetthestandardofsecuringsafeandhygienicproductsismademoredifficultbythefactthatwerepeatedlyrecycleourpapermaterialsintheinterestofenvironmentalsustainabilityandcostefficiencies.Asourrawmaterialismostlypost-consumerrecoveredpaper,itisimportantthatweensurethattherecycledproductsweproducecomplywiththeEuropeanRegulationonmaterialsthatcome intocontactwithfood.

SmurfitKappaisactivelycontinuingitseffortstofurtherincreasethesafetyofrecycledpackaging.SpecificallyforfoodpackagingSmurfitKappafollowsbothGoodManufacturingPracticeandhygienestandardssuchas:

nEuropeanfederationofCorrugatedBoardManufacturers(fEfCO)InternationalGoodManufacturingPracticeStandard.

nInternationalfeaturedStandardsIfSfoodversion5asitrelatestopackagingtogetherwiththeIfSPackagingGuidancedocumentfromJune2010.

nBritishRetailConsortium/InstituteofPackagingGlobalStandardforPackagingandPackagingMaterials.

nEN15593,EuropeanStandardinrespectofthemanagementofhygieneintheproductionofpackagingforfoodstuffs.

nISO22000,Internationalstandardforfoodsafetymanagementsystems.

WealsoengageactivelywithintheEuropeanpaperandpackagingassociations,CEPIandfEfCO,todevelopindustryinitiativesandtodefinebestpracticestobeappliedbothinEuropeandLatinAmerica.SmurfitKappahasanexperiencedinternalteamwhichisdedicatedtofoodcontactandfoodsafetyissues.

Barry Smith (l.) and Mark Winkler from Smurfit Kappa Yate, UK.


OURLONGTERMSUSTAINABLE DEVELOPMENTCOMMITMENTS

Oureffortsonsustainabilityarepartofajourneyofstrivingforcontinuousimprovement.Tomeasuretheprogresswearemakingonthatjourney,wehavedefinedspecifictangibleandmeasurabletargets withincertaintimeframes.

In2010,weadoptedfourlongtermcommitmentswithmeasurabletargetstostateourambitiontobealeadingsustainablecompanyandtoprovidepaper-basedpackagingsolutionsforourcustomersinanenvironmentallyandsociallyresponsiblemanner.

Theselongtermcommitmentsarerelatedto:

nSustainableuseoffibres

nReducingfossilCO2 emissions

nCleanwaterdischarge

nEthicalbusinessconduct

Inthissectionwedescribetheachievementstodate,activitiesin2012,andcurrentandfutureactivitiesrelatedtothesecommitments.

AsmentionedintheLetteroftheCEOonpages6 and7,wehaverecentlymadeourlongtermvisiononsustainabilitypublicinaseparatepublicationcalled‘TheSmurfitKappaVisiononSustainability’(http://www.smurfitkappa.com/Resources/Documents/The_Smurfit_Kappa_vision_on_sustainability_May_2013.pdf).Wehavewidenedthescopeofour longtermobjectivesandcommitmentstoinclude, inadditiontothecurrentlongtermcommitments, anumberofothersustainabledevelopmentissues thatweconsiderimportant.Theseissuesarewastemanagement,waterusage,safetyatworkandourinvolvementinthelocalcommunitieswhereweoperateandwhere,asavaluedcorporatecitizen,wewanttomakeadifferenceforthelocalpopulation.WeintendtoreportinournextSustainableDevelopmentReportontheprogresswearemakinginreachingourobjectivesandtargets.

1. SuSTAiNABlE uSE Of fiBRESThesustainableoriginofrawmaterialisoftheutmostimportanceforus.Sustainablefibreforusmeansfibresthatarecertifiedorareofanon-controversialorigin(seeglossaryonpage95).Wearefullycommittedto

thatprinciple,bothforourvirginfibresaswellas ourrecoveredfibresthatweuseasrawmaterial. Oursustainablymanagedplantedforestsarenot onlyproductive,theyalsosecurebiodiversity (pages30to32).

COMMiTMENT

By 2015:

1. All of our fibres produced or purchased will be from sustainable origin.

2. Over 90% of the paper and board produced will be certified Chain of Custody.

3. Over 90% of our converting operations will operate under a Chain of Custody certification.

Weaimtodeliverpackagingsolutionstoourcustomerscontainingonlycertifiedfibresand/orfibresofnon-controversialorigin.furthermore,atanypointintimeourproductsshouldmeetthecommitmentswemakeinourvariouspolicystatements(forestrypolicy,CodeofBusinessConduct,SocialCitizenshipetc.). Thisconcernsallfibresandfibre-basedproductsweuseormanufacture,whatevertheoriginortheform ofthefibres.

WoodandvirginpulpproducedorpurchasedarepreferablyChainofCustodycertifiedwiththeremainderofnon-controversialorigin.Atotalof55% ofthewoodusedintheSmurfitKappamillsystemforproducingvirginpaperorpulpiscurrentlyChainofCustodycertifiedunderthefSCand/orPEfCschemesand45%isofnon-controversialorigin.ThisstatusisverifiedbyathirdpartyunderthechainofcustodyschemefSCand/orPEfCwiththeexceptionofthe SanfelipemillinVenezuela,duetolocalconditions.

Inadditiontothecommitmentmentionedaboveourfinalaimisthatallthefibre-basedproductswedelivertoourcustomersareChainofCustodycertified.


Achievements to datenOurColombianforestshavebeencertifiedfSC

since2003.

nThecompleteSmurfitKappapaperandboardmillsysteminEuropeisChainofCustodycertifiedundereitheroneorbothschemeswesupportinEurope(fSCandPEfC).Thisincludesmillsproducingvirginandrecycledcontainerboard,cartonandsolidboard,sackpaperandmachineglazedpapers.Thisissummarisedonpage32andfulldetailscanbe foundonourwebsite.

nInLatinAmerica,ourColombianmillsandconvertingoperationsareChainofCustodycertifiedunderfSC.

nInfebruary2013wereachedourlongtermcommitmenttooperateover90%ofourglobalsystemofconvertingoperationsunderaChainofCustodycertificationscheme.

nAllconvertingoperationsofColombia,MexicoandArgentinaareChainofCustodycertifiedunderfSC.

Activities and results in 2012nIn2012,considerableprogresswasmadeinthe

certificationprocessofconvertingoperationsinbothEuropeandLatinAmerica.Atotalof97newplantsbecameChainofCustodycertifiedduringthecourseoftheyearresultingin88%ofourglobalpackagingoperationsbeingChainofCustodycertifiedaccordingtoeitherfSCand/orPEfCattheendof2012(upfrom44%attheendof2011).

n WecompletedathreeyearcertificationprogrammeforourEuropeanconvertingoperationsinfebruary2013whenthelastofalldesignatedconvertingoperationsin19EuropeancountriesreachedChainofCustodycertifiedstatusundereitherafSCand/orPEfCscheme.

n During2012,allconvertingoperationsinMexico andintegratedconvertingoperationsinArgentinareachedChainofCustodycertifiedstatusunderfSC.

n InLatinAmerica,thethreeMexicanpapermillswereChainofCustodycertifiedunderfSCinfebruary2012.

n Attheendof2012,86%ofpaperandboardproducedinourGroupwascertifiedforfurtherlabellingChainofCustodyaccordingtoeitherPEfC orfSC,upfrom78%attheendof2011.

n Wecontinuedauditingoursupplierstoensurethatnowoodfibreoriginatesfromcontroversialsources.

Current and future activitiesnInfebruary2013wereachedalevelof92%Chainof

Custodycertifiedconvertingplants,enablingusandourcustomerstotracetheoriginofthefibresweuse.

nWeplantostartfSCcertificationactivitiesofourforestholdingsandcertainmanufacturingfacilities inVenezuelain2013.

nInourpublication‘TheSmurfitKappaVisiononSustainability’weintroducedfurthertargetsintheareaofchainofcustodycertification,committingto90%ofourpaperbasedpackagingbeinglabelled asChainofCustodycertifiedunderfSC,PEfCor SfIby2015.

nInMarch2013,thenewEUTimberRegulationbecameeffective.Wehavetakenactionwherenecessaryinourownsupplychainsothatwewill becompliantatalltimeswiththisnewregulation.ThisnewEURegulationisdesignedtopreventillegallyloggedwoodandproductsmadefrom suchwoodfromenteringtheEU.

Smurfit Kappa commitment no1: 100%ofwoodproducts fromsustainableorigin

SmurfitKappaOperations

SmurfitKappa Woodbasedproduct

Externalwood basedproduct

Smurfit Kappa commitment no2: Over90%ofSKpapers COCcertified

Smurfit Kappa commitment no3: Over90%ofSKconvertingoperationsCOCcertified

FoRestRy PAPERPRODUCTIONPULPPRODUCTION CONVERTING opeRations Wood Pulp Paper

Packagingsolutionstocustomers

purchased pulp

Recycled paper

Origin of Fibre CommitmentNo1 appliedtorawmaterial

purchased Wood

purchased paper

(pre-and-post consumer)


Our long Term Sustainable development Commitments [continued]

nforovertwodecadeswehavebeenfocused onreducingCO2emissionsfromfossilfuelsrelativetoproduction.forexample,ourNettingsdorfermillinAustriaandourRoermondmillintheNetherlandshaverealisedover30%reductionsinCO2emissionspertonneofpaper.

n Between2005and2012,fossilCO2emissionspertonneofpaperandboardproducedhavedecreasedby15.2%.Thisisillustratedinthegraphonthispagewhichshowstheannualimprovementcomparedtothebaseyear2005.

Activities and results in 2012nIn2012,thetotalCO2 fossilemissionsofour

globalpaperandboardmillsystemdecreasedby3.1%comparedto2011.Thisemissioncomparisonisvolumeadjusted.Inthecourseof2012anumberofenergyrelatedinvestmentswerecompleted,resultinginanotheryearofgoodprogresstowardsreachingourobjectivefor2020.Detailsofsomeoftheseinvestmentsarediscussedbelow.

nInoursackkraftpapermillinNervióninSpain,theinvestmentinalargersteamturbinetoincreasetheproductionofbiomassbasedelectricityhasledtolessusageofelectricityfromthegrid.Theturbinebecameoperationalinthefirstquarterof2012andreductionofCO2 fossilemissionisestimatedtobe14,000tonnesperyear.

nInourkraftpapermillinNavarrainSpain,thebiomassboilerhasbeenrebuiltandisinoperationsinceOctober2012.Directfossil CO2 emissionsareestimatedtodecreaseby22,000tonnesonanannualbasisasaresult ofthisrebuild.

nInourrecycledpapermillinHoyainGermany amulti-yearinvestmentprojectisprogressing.Inafirstphase,thepapermachinewasupgradedin2011,reducingtheuseofenergy.Initialresultsafterthecompletionofthefirstphaseindicateareductionofapproximately7%offossilCO2 emissionspertonneofpaperproducedforthismill.

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2. CO2 EMiSSiONSClimatechangeand‘globalwarming’arewidelyseenassustainabilityissuesofhighpriority.Wealsoconsiderthemtobeamongthemostimportantsustainabilityissuesastheyarecloselyrelatedtoourbusiness.Energygenerationveryoftenalsoinvolvessignificantemissionsfromburningfossilfuels.ThereforeourfossilCO2 reductionprogrammeistoalargeextentdirectedatincreasingefficientenergyusageandincreasingtheuseofbiomasswherethatiseconomicallyviable.WehavetakeninitiativesbothinEuropeandLatinAmericatoaddressthissubject.WecontinuouslyinvestinprojectsthatshouldleadtohigherenergyefficiencyandreductionoffossilCO2 emissions.

COMMiTMENT

20% reduction in relative CO2 emissions from fossil fuels in our global paper and board mill system in 2020 compared to 2005 (CO2 emissions defined as direct and indirect CO2 emissions from fossil fuel relative to production).

Achievements to datenWehavebeenswitchingfromfossilfueltorenewable

energywherepossibleandeconomicallyfeasible(PiteåbiomassboilerinSwedeninstalledin2007,newblackliquorboilerinstalledatCaliinColombiain2008,biomassboilercommissionedatCelluloseduPininfrancein2010anduseofbiogasfromthenewand/orextendedwatertreatmentplantsinvariouspapermills).


nInourrecycledpapermillinCerroGordo,MexicoCity,ashoepresswasinstalledinthepresssectionofthePM-5increasingthedrynessofsheetsenteringthedryersectionandleadingtoanaveragereductioninnaturalgasconsumptionof14%pertonneofproductproducedonthismachine.Evenwithaproductionincreaseofmorethan4%,thisequatestoanannualisedabsolutereductionof4,300tonnesoffossil CO2 emissions,resultingalsoinlessemissions ofNOx.

nInourrecycledpapermillinBarranquillainColombiatheinstallationofonelargegasturbine,producingbothsteamandelectricityandreplacingolderunits,willleadtoanestimatedreductionoffossilCO2 emissionof13,000tonnesonanannualbasisoncetheunitisfullyoperational.

Current and future activitiesnInourkraftpapermillinCaliinColombiathe

installationofanew,moreefficientlimekilnwascompletedinthefirstquarterof2013.Thenewlimekilnwillusenaturalgasasfuelwhereasthepreviouslimekilnwasusingheavyfueloil.Theuseofmuch‘cleaner’naturalgasshouldreducefossilCO2 emissionsbyapproximately13,000tonnesperyear.

nInourrecycledpapermillinHoyainGermanythesecondphaseofamulti-yearinvestmentprojectiscurrentlyprogressing.ThissecondphasewillincludetheinstallationofanadditionalCHPunitwhichshouldleadto areductionoffossilCO2 emissions.Aftercompletionofthesecondphase,fossilCO2 emissionspertonneofpaperproducedareestimatedtobereduced(includingphaseI) byapproximately13%.

nInourrecycledpapermillinTownsendHookintheUKwewillreplacethetwoexistingpapermachinesbyonenewmachinewithaslightlyhigherproductioncapacity.ThismachinewillhaveanimprovedenergyefficiencycomparedtothetwoexistingpapermachinesandthereforesaveondirectfossilCO2emissions.Thestart-upofthismachineisplannedforQuarter4,2014.

n InourrecycledmillInRoermondintheNetherlands,aprojecthasbeenapprovedtomodifythePM-1intoamedium/lightweightpapermachineandtoincreaseitscapacity. Thechangestothemachinewillresultinmoreefficientuseofenergyandgeneraterelative CO2emissionreductions.

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3. wATERWaterisseenasasustainabilityissueofincreasingimportance.WaterisabundantlypresentonEarth:yet theavailabilityoffreshwaterislimitedandaccording tothefoodandAgricultureOrganisationoftheUNitisdecreasingandunequallydistributed.Waterisalsoacriticalresourceforthepaperandpackagingindustryandafterfibre,wateristhemostimportantnaturalresourceforourbusiness.Aswereturnapproximately90%ofthewaterwetakein,ourspecificcommitmentforwaterandourprimaryinvestmentfocusinthisareaisonthequalityofthewaterthatisreturnedtothepublicwaterbody.TheCODcontentisagoodindicatorforthequalityof thewaterreturned.

COMMiTMENT

Reduce the organic content discharged in the process water (COd) of our mill system by one third by 2020 compared to 2005. The reduction is relative to the organic discharge measured by COd, expressed per tonne of paper.

Achievements to datenInvestmentsinwatertreatmentplantstookplacein

anumberofpapermillssince2005:Alfad’Avignon,CelluloseduPinandRethelinfrance,MengibarandNavarrainSpain,HoyainGermany,RoermondintheNetherlands,SSKintheUK,AniainItalyandBernal inArgentina.

n Since2008ourLatinAmericanmillshavetakeninitiativesresultinginmorethan19%decreaseinwaterintakepertonneofproductproduced.

n Between2005and2012,CODcontentintheprocesswaterdischargedbyourglobalpaperandboardsystemhasdecreasedrelativetoproductionbyover25%.Thisisillustratedinthegraphabovewhichshowstheannualimprovementcomparedtothe baseyear2005.


Our long Term Sustainable development Commitments [continued]

Activities and results in 2012nIn2012,thetotalCODdischargeofallourpaperand

boardoperationsdecreasedby5%comparedto2011.

nInourrecycledpapermillinAniainItalytheanaerobicstageofthewatertreatmentwasextendedinJuly2012,leadingtoasignificantimprovementofthequalityofthewaterdischarged(seealsopages40and41).

nInourrecycledpapermillinBernalinArgentinathenewlyconstructedwatertreatmentplantwasstartedupinearly2012andisoperatingatfullcapacitysinceApril2012.CODdischargesattheBernalfacilitydecreasedbyover60%in2012comparedto2011.

nInourrecycledpapermillinCaracasinVenezuelabetterfibrerecoveryresultedinadecreaseofapproximatelyonethirdinthedischargeofCOD in2012comparedto2011.

nAttheendof2012,90%ofourpaperandboard isproducedinmillswherebestpracticesareimplemented.Bestpracticeforwatertreatmentincludesatleastonestepwithbiologicaltreatmentbeforedischarging.

Current and future activitiesnThereareseveralinvestmentsinwatertreatment

facilitiesinbothEuropeandLatinAmericawhicharebeingplannedforimplementationinthenextfewyears.

nWearecontinuingourprogrammeofbestpracticeinthetreatmentofourprocesswaterbothinEuropeandLatinAmerica.

4. COdE Of BuSiNESS CONduCTAsamultinationalGroup,overtheyearstheemployeebasehasgrownconsiderablynotonlyinsizebutalsoinculturalandsocialdiversity.Thisdiversitydemandsthedevelopmentandadherencetosharedcorevaluesandbusinessprinciplesintheareaofbusinesspractice,healthandsafety,employeerelations,humanrights,environmentandcommunityinvolvement.TheGroup’scommitmenttotheseprinciplesisconfirmedbyourCodeofBusinessConduct,towhichallofourcompaniesandemployeesalikemustadhere.

TheCodeofBusinessConductissupported,andfurtherexpandedupon,byanumberofpoliciesandstatementsdetailingtheGroup’scommitmenttoexcellenceinourrelationshipswithouremployees,shareholders,customersandsuppliers,andgovernmentalauthorities inthecountriesinwhichweoperate.

COMMiTMENT

To continuously emphasise the importance of the Code of Business Conduct to our employees and to integrate these principles into our day-to-day business dealings.

Achievements to datenEstablishedandimplementedanumberofGroup-

widepoliciesinareaslikeethicalbusinessbehaviour,finance,healthandsafety,environmentandsourcing.

nEstablishedaCodeofBusinessConduct,whichisapplicabletoallemployeesacrosstheGroup.

nAppointedaGroupComplianceOfficerwithanactivereportingroletotheGroupBoard(AuditCommittee).

nIntroducedaGoodfaithReportingPolicyStatement(‘WhistleblowerCode’),whichprovideschannelsforallemployeestoraiseconfidentiallyconcernsinrelationtoperceivedimproperactions.

nSigneduptotheUNGlobalCompactinitiative.

nAuditedourstrategicsuppliersontheircodeofconductprogrammesthroughourSustainabilitySourcingPolicy.


Activities and results in 2012nASafetyOpinionSurveywascarriedoutinthefirst

halfof2012inallourEuropeanplantstomeasuresafetyconditionsandtoidentifyareasforimprovement.

nHavingbeenbenchmarkedagainstaninternationalpeergroupforbestpracticesandappropriatelyrevised,theCodeofBusinessConductwasapprovedbyourBoardofDirectors.ThenewCodeofBusinessConducthasbeenpublicisedontheGroup’sinternalandexternalwebsites.

nIn2012,aninternalcontrolquestionnairewascompletedacrossouroperations.TheGroup’sCodeofBusinessConductandGoodfaithReportingStatementhavebeendistributedtotheplantmanagementandsupportstaffineveryGroup facility,whichaccountsforabout30%oftheentireworkforce.AllplantgeneralmanagersandfinancialcontrollersconfirmedtheirunderstandingandadherencetotheCodeofBusinessConduct. ThisprocessrequiredwrittencertificationthatallemployeeshadbeenmadeawareoftheCodeofBusinessConductandWhistleblowerCodeand thatanyknownorsuspectedviolationshadbeenreportedappropriately.

nIn2012,anawarenesscampaignandtrainingprogrammewasundertakeninallourGermanoperations.

n EverylevelofmanagementthroughouttheGrouphasaresponsibilitytomonitorandenforcetheGroup’sguidelinesonCompetitionPolicy.Approximately900managingandsalesdirectors,salesmanagersandotherseniormanagementacrosstheGroupconfirmedtheirunderstandingoftheGroup’szerotolerancepolicywithregardtoanti-competitivebehaviour. Theprocessrequiredwrittencertificationfromeachmanagerthathe/shehadnotbeenengagedin, norwasawareof,anysuchactions.

nAnewGroupfoundationforCSRco-investmentactivitystarteditsinitiativesin2012andapprovedparticipationintwoprojectsinIrelandandone inColombia.

Current and future activitiesnTheCodeofBusinessConductisorwillbemade

availableintherespectivelanguagesonthevariousnationalwebsitesoftheGroup.

nfollowingagreementonthenewCodewiththerespectiveWorksCouncils,anawarenessprogrammewillbeimplementedgroup-wide.

Ida Ferrière, Christophe Camin and Joël Cazenave – Smurfit Kappa Cellulose du Pin, France.


enviRonment

Respectingthenaturalenvironmentinwhichweoperate ispartofouroverallmission.Theworldisfacedtoday withanumberofglobalenvironmentalchallengessuchasdeforestation,climatechange,energyconsumption,watershortagesandwaterqualityandbiodiversityloss.Wearedealingwiththeseissuesinourownoperationseveryday. Weareforestowners,usersofwoodandpaper,and inneedofsignificantamountsofenergyandwaterforourproductionprocess.Wearecommittedtooperateinanenvironmentallyprogressivemanner,whichisoneofourmainprinciplesunderlyingsustainability.Whileweaimtominimisetheimpactouractivitieshaveontheenvironmentasmuchaswecan,ourprinciplefocusisonthoseareaswhereouractivitiespotentiallyhavethelargestimpact.Theseareasaretheuseoffibresandtheuseofwood,theuseofenergyandfossilCO2emissionsandtheusageanddischargeofwater. Asforestownerswepracticesustainableforestrysupportingbiodiversity,asusersofwoodandpaperfibresweguaranteethesustainableoriginofourrawmaterialsandasusersofenergyandwaterweinvestcontinuouslyinmakingourprocessesmoreenergyandwaterefficient.

1. SuSTAiNABlE uSE Of fiBRESAlmostallofthepackagingproducedbySmurfitKappaismadefrompaper.Inthissectionweexplainhowourproductscontributetowardssustainability,howweusebothvirginandrecycledfibresandouroverallsustainableuseoffibres.

Efficientpackagingsolutionscontributesignificantlytothesustainabilityofthetotalsupplychainofgoods.Packagingnotonlyprotectsproductsduringtransit,itoftenhelpstopreservetheproduct,carriesimportantproductinformationforconsumersandprovidesmarketingopportunitiesforbothmanufacturersandretailers.

Paper-basedpackagingisaveryenvironmentallyfriendlyformofpackagingastherawmaterialcomesfromrenewablesourcesandtheendproductisfullyrecyclable.

AmajorpriorityofSmurfitKappaistoprovidecustomerswithsustainableandefficientpaperpackaging.Virginorrecycledpapersarethemostsustainablechoicedependingonuserrequirementsandthesupplychainspecifics.

Recycled pulp produced internally

Wood pulp produced internally

Purchased virgin pulp

Virgin paper purchased

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Dirk Schneider (l.) and Alexander Heidland (r.) from Smurfit Kappa Zülpich, Germany.


Environment [continued]

Aswoodfibresdegradeeverytimetheyarerecycled, afreshvirginfibreinflowintotherecyclingsystemisrequired.Thelengthofawoodfibreisshortenedduringeverycycleandafteracertainnumberofcycles,theoriginalfibreistotallydegraded.Therefore,virginfibre isconstantlyaddedtothesystemtocompensateforthelossofdegradedfibre,archivalstorageofpaper,andthelossthroughnormaluseanddisposalofcertainpaperproducts(e.g.tissues).

Paper-basedpackagingisalmosttotallyrenewableandrecyclable.TherecyclingrateforpaperandboardpackagingwithintheEU’s27memberstatesfor2010,whichisthelatestyearforwhichofficialEurostatstatisticsareavailable,was83.5%(seegraphpage26)thusshowingthatpaper-basedpackaginghasahigherrecyclingratethananyotherpackagingmaterial.

ChainofCustodycertificationwillhelpustoensurethatthenaturalresources,whichweneedanddependupon,areresponsiblymanagedandthatwecanprovideourcustomerswiththesustainablyproducedproductsthattheyrequire.

use of virgin fibresTypicalproductscontainingvirginfibresarewood, virginpulpandcertaincategoriesofpaperandboard.

Lessthan16%ofthewoodweusefortheproduction ofvirginfibresoriginatesfromourownforests.Wethereforeensure,togetherwithourexternalsuppliers,thatthesupplyofwoodisfromsustainableorigins andthatoursuppliersimplementstrictpoliciesformonitoringtheoriginofwoodfibresthusensuringtheprotectionofnaturalresourcesinthecountriesfromwhichwesourcethem.Thepoliciesinplacearebased onforestcertificationsystems.

Bothourownforestoperationsandourwoodpurchasingpracticesarebasedontheprinciplesofenvironmentallycompliantforestmanagementschemes.In2007, wecommittedtoaprogrammeofChainofCustodycertification,givinginitialprioritytoouroperations whichhandlewood.Wehaveextendedthismanagementsystemtoourentiremillsystem(bothvirginandrecycledpaperandboard)andtoourpackagingoperations.

WeareboththelargestproducerofvirgincontainerboardinEuropeaswellasinthosecountriesinLatinAmericawherewehavevirgincontainerboardproductionfacilities.69%ofthevirgincontainerboardusedforthemanufacturingofpackagingisproducedinternally:theremainderispurchasedfromthirdparties.Throughaverificationprogrammewithexternalsuppliersweensurethatthesupplyofvirginpaperiseithercertifiedorisof non-controversialorigin.

Thetargetsinourlongtermsustainabledevelopmentcommitmentrelatedtosustainableuseoffibresshow ourdrivetoapplytheprinciplesdescribedinthisarea.

OurSustainableforestrystatementandourSustainableSourcingpolicyareavailableatourwebsiteanddescribeourcodesofconductwithregardtoallsuppliesofwoodproducts,whethercomingfromourownforestsorpurchasedfromthirdpartysuppliers.

use of recycled fibresIn2012,forourmanufacturingoperationsinEurope,75%ofourfibrousrawmaterialscamefromrecycledfibres.Thisfigureequatedin2012forourmanufacturingoperationsinLatinAmericato67%.

Weconsumeover5.1milliontonnesofrecoveredpapereachyear.Ofthisfigure,4.3milliontonnesareinEuropeandmostofthisissuppliedthroughourownrecoveryandrecoveredpapersupplysystemwhichmakesustheclearindustryleaderinthisregard.Over70%ofourLatinAmericanneedsarealsocollectedwithinourownsystemorsecuredthroughcontractswiththirdpartysuppliers.Thepie-chartonpage26indicatesthesourceoffibresusedinouroperations.

Sustainable fibres - Our approachSmurfitKapparecognisesandutilisestheforestryStewardshipCouncil(fSC),theProgrammefortheEndorsementofforestCertification(PEfC)andtheSustainableforestInitiative(SfI),thethreemajorinternationalforestcertificationbodiestoqualifythewoodandthevirginfibrebasedproductswepurchase aswellasthepaper,boardandpackagingweproduce inouroperations.

TheChainofCustodycertificationprocesswehaveimplementedinouroperationsensuresthatassessmentsareperformedregularlybyindependentaccreditedorganisations,providingassurancethatthewoodandfibreswesourceexternallyoriginatefromsustainableandwellmanagedforestsandarelegitimatelysourced.Thiscertificationprocessisimportantforourownoperations,ourcustomersandoursuppliers.

OurultimateaimistoreachChainofCustodycertificationforallofourrelevantoperationsandforalltheproductswedelivertoourcustomers.Thisshowsourcommitmenttoasustainablemanagedsupplychainrangingfromsustainableforestmanagementpractices todeliveringChainofCustodycertifiedproductsto ourcustomers.


Forestry

SmurfitKappaownsandmanagesapproximately105,000hectaresofforestsinColombiaandVenezuela.Theseplantationsprovideourmillsinbothcountrieswithalmostalloftheirvirginfibrerequirements.

Wemanageforestholdingsbasedonoursustainabledevelopmentprinciples,promotingeconomicgrowth,aresponsibleuseofnaturalresourcesandfosteringsocialequityintheregionswheretheforestplantationsarelocated.

SmurfitKappa’slargestforestplantationsareinColombia.Here,wehaveapproximately69,000hectares,including6,400hectaresinpartnershipswithprivatelandowners.Thisareacomprisesover44,000hectaresofcommercialplantations,approximately22,000hectaresofprotectednaturalforestandjustover3,000hectaresforinfrastructure.Ofthecommercialplantations,60%arepines,39%Eucalyptusand1%dedicatedtoforestryresearch.WeoperateourColombianforestholdingsunderamanagementsystemthathasbeencertifiedinaccordancewiththefSCsince2003.

InVenezuela,weownapproximately35,000hectaresinthreewesternstatesofthecountry.Ofthistotal,21,000hectaresarecommercialplantations,13,000hectaresarenaturalreservesandthebalanceisgivenovertoinfrastructure.Commercialplantationsinclude12,600hectaresofshortfibre(EucalyptusandGmelina)while6,400hectaresarelongfibrefrompine.Thebalanceisusedforresearchanddevelopmentsuchassilviculture,plantationmanagement,forestprotectionandforestryresearch.

TheforestplantationsinVenezuelahavenotyetbeencertifiedbutarewelladvancedintermsofbestpractice.WeplantostartfSCcertificationactivitiesofourforestholdings in2013.

ThemainspeciesharvestedinbothcountriesarevarietiesofEucalyptusandpine.

Duringtheplantationlifecycle,SmurfitKappaconformstothenumerousgovernmentallegal,technicalandenvironmentalregulations,forwhich,inmostcases,annualpermitrenewalsarerequired.

ENGAGEMENTWITHSTAKEHOLDERS

Russia: Sustainability important ingredient in Russian partnershipDmitry Zylev, GeneralDirectorofArkhangelsk

“ArkhangelskPulpandPaperMillhasprovidedtheRussiancorrugatedoperationsofSmurfitKappasincethe1990swithkraftlinerandfluting.Theserawmaterialsareusedfortheproductionofcorrugatedpackaging.Thelong-lastingrelationshipbetweenthetwocompaniesgoesbeyondtheproductlevelandalsoemphasisesthefocusoncorporatesustainability.

Arkhangelsk’smainactivitiesaretheloggingandtheprocessingofwoodintopulpandpaperproducts,suchascardboard,cellulose,andpaper.Arkhangelskisoneofthemainproducersofkraftliner inRussiaandanimportantsuppliertoSmurfitKappainRussia.

ArkhangelskissupportingSmurfitKappainitsendeavoursforsustainability.In2006,ArkhangelskwasthefirstamongRussia’spulpandpapercompaniestooperateunderthefSCtrademark. InMarch2013thescopeofthefSCcertificationwasexpandedtoincludealsokraftlinerandfluting.Inaddition,anumberofitswoodsuppliersareoperatingundermanagementsystemscompliantwithfSCrequirements.Arkhangelskaimstoreducetheadverseimpactontheenvironmentofitsactivitiesincludingthepreventionofpollution.ArkhangelskisamemberoftheEcologicallyResponsibleTimbermenofRussia,whichisapartoftheGlobalforestandTradeNetwork(GfTN),establishedundertheumbrellaoftheWWf.

Arkhangelskisalsoadheringtosustainablesocialprinciples. Asthelargestenterpriseinitsregionitisawareoftheexclusiveroleithastofulfilinboththesocialaswellastheeconomiclife ofitslocalcommunity.Itdoessobysupportingprogrammesthatshouldensureitsintegrationinthelocalandregionalcommunities.Arkhangelskalsoplaceslabourrelationsatthecore:employeesareemployedstrictlyincompliancewithregulations,withaveragepaywellabovetheaveragefortheregionandwithattentiontoandinvestmentsinoccupationalsafety.

ArkhangelskislookingforwardtocontinuingitscooperationwithSmurfitKappanotonlyasasupplierbutalsoinsharingthesameprinciplesonsustainability.”



Paper and Board production

WiththeexceptionofourSanfelipemillinVenezuela, allourwoodhandlingoperationsareChainofCustodycertifiedbyfSCorPEfC.Theseincludeallourmillsproducingvirginfibresandourwoodsupplycompanies infranceandSpain.

OurcompletepaperandboardmillsysteminEuropeisChainofCustodycertifiedsinceearly2011.Thismillsystemconsistsofmillsproducingvirginandrecycledcontainerboard,cartonboard,solidboard,sackpaperandmachineglazedpapers.OurEuropeanmillsarecertifiedbothforfSCandPEfC.

CertificationofourpaperandboardmillsinLatinAmericaisprogressingwithfSCChainofCustodycertificationofallpapermillsinplaceinColombiasince2009andinMexicosinceMay2012.OurtwopapermillsinArgentinaaretobecertifiedbytheendof2013.

Packaging operations

ChainofCustodycertifiedpackagingguaranteesourcustomersthatonlysustainablefibresareusedintheirpackaging.forvirginpapers,thismeansthatfibresoriginatesolelyfromsustainablymanagedforestsand, forrecycledpaper,itmeansthatasignificantamountofpost-consumerrecoveredpaperisusedasrawmaterial.Theentiresupplychainistraceabletoprovethistoourcustomers.

In2009,weinitiatedaprogrammeinourpackagingoperationstosupplycustomerswithChainofCustodycertifiedproducts.Ourtargetistobeabletooffercertifiedpackagingtoallourcustomersfromallourpackagingproductionlocations.

Considerableprogresshasbeenmadeduring2012andinearly2013,wereachedalevelof92%ofourpackagingoperationsinEuropeandLatinAmericabeingChainofCustodycertifiedfSCand/orPEfC.Thissurpassedthetargetedlevelof90%inourlongtermsustainabledevelopmentcommitmentforthesustainableuseoffibres(pages20and21).

Overview of certification in place at end of 2012

Thetableonpage32givesadetailedoverviewofourpapercapacityoperatingunderChainofCustodycertificationpergradeofpapertogetherwiththenumberofconvertingoperationsalsounderChainofCustodycertification.

ThefirsttwosectionsofthetablegivethepercentageofourpaperorboardproductioncapacityoperatingwithChainofCustodycertificationwhilethelastcolumnreportstheexactpercentageofthepaperorboardthatcanbesoldasChainofCustodycertified.ThisinformationisprovidedbytypeofpaperandboardproducedinbothEuropeandLatinAmerica.

Thesepercentagesreflectthesituationattheendof2012.Tosimplifythecalculation,whereamillobtainedthecertificateduringtheyear,theannualproductionofthemillistakenintoaccountforcalculatingthepercentage.

Thethirdsectionofthetablerelatestothepackagingoperations.Herethenumberofsitesoperatingwith ChainofCustodycertificationisreportedandthesecondcolumngivesthepercentageofsiteswithChainofCustodycertification.

Suppliers

Tomakefurtherprogressinthecertificationofourproducts,in2012wecontinuedourverificationprogrammewithexternalpapersupplierstoensurethat,asaminimum,allvirginfibrescontainedinthesuppliedpapersorboardareofnon-controversialoriginandarepreferablyChainofCustodycertifiedunderPEfCand/orfSC.Thisverificationprocessincludesallourexternalpapersuppliersandisbasedonphysicalaudits.Attheendof2012,79%ofallourexternalvirginsupplies inEuropewerefSC,PEfCand/orSfIcertifiedorhavePEfCand/orfSCcontrolledwoodstatus.InMarch2013,thispercentageincreasedto95%.Theremaining5%ispurchasedthroughagentsthatarenotcertified.However,themajorityofthat5%hasacertifiedoriginwhilethebalanceisfromnon-controversialorigin.

BiodiversityInColombia,31%ofourtotalforestareaisprotectednaturalforest;inVenezuela37%ofourtotalforestarea isprotectednaturalforest.Theseprotectedpartsofourforestsarekeptasnaturalforestandarenotreplacedbyplantations,thusmaintainingbiodiversity,preservingwatershedsandhelpingtoconservenaturalhabitats.

TheguidingprinciplesoftheGroup’sforestrypolicyinLatinAmericaareto:

nDevelopcontinuouslyandsystematicallyresearchprogrammestopreserveandenhancesoilproductivity.

nIdentifyappropriatespeciesandforestrypracticesthatwillenableanincreaseinplantationyieldswhileprotectingtheenvironment.

nConservenaturalforestslocatedoncompanylands toensurethesustainabilityofforestdiversityandtherebycontributetotheprotectionofwatersourcesandhabitatoffloraandfauna.

InColombia,wearecontinuouslyinvestinginresearchprojects,frequentlyincooperationwithotherresearchinstitutesasthefollowingexamplesshow.

TogetherwiththeNationalCentreforCoffeeResearch(CENICAfÉ)weworkedonthepotentialcarbonsequestrationcapabilitiesofthepineandEucalyptusspeciesplantedbySmurfitKappa.The“3Cfix”(CartóndeColombiaCarbonfix)modelwasdevelopedandcarbonsequestrationfiguresareavailablesince2007.


In2012,thecombinedgrowthofpinesandEucalyptusinourColombianplantationsabsorbedsome1.1milliontonnesofCO2 fromtheatmospheretherebyfixing300,000tonnesofcarbonwithinit.Thewoodharvestedinthesameperiodcontainedapproximately276,000tonnesofcarbon,givingapositivecarbonbalanceofover24,000tonnesofcarbonoritsequivalentof88,000tonnesofCO2.

Since1969,whenwebeganourforestryactivityinColombia,wehavecommittedtoprotectallnaturalforestslocatedinourexpandinglandholdings,respectingtheexistingbiodiversityinbothtypes offorests.

Inordertoeffectivelyprotectandpromoteconservation,since2009wehavebeenworkingwithtwolocaluniversities(CaucaandQuindío)onstudiesofthefloraandfaunapopulationsinourprotectednaturalforeststhatarewithinorsurroundtheplantedforests.Thesestudiesfocusonmammalsandbirds.

Apartfromtheobjectiveofidentifyingtheexistenceofthespecies,wefocusedondeterminingwhichspecieswerecategorisedasendangeredbyinternationalorganisationssuchastheInternationalUnionforConservationofNature(IUCN).

Attheendof2012,wecompletedasecondstudy ofourforestholdingsinQuindíotogetherwiththelocaluniversity.fournewendangeredspecieswereidentified.Attheendof2012andoverthepast fouryearswehaveidentified1616species:905areflora,631birdsand80mammals.Ofthese,26areendangeredtosomedegreeaccordingtoIUCNcategorisation:12speciesofflora,9birdsand5mammals.fromthisresearchitisclearthattheforestplantationsandtheneighbouringprotectednaturalforestformimportantwildlifecorridorswhichcontributetospeciesconservationintheAndeanecosystem.

Theresultsofthisstudywerepresentedinour 2012calendar,whichhada40,000unitprintrun andwassenttoallourstakeholders.Wehavealsopublishedthreehandbooksonthestudyfindings.Theobjectiveofthesehandbooksistopromotespeciesconservationthroughobservationandidentification.Thesehandbookshavebeendistributedtosurroundingcommunitiesandmanagersofourforestryfarms.


Colombia: universityGuillermo Vásquez Velásquez AssociateProfessor,forestHydrology andWatershedManagement NationalUniversityofColombia(MedellínCampus)

“Therelationshipbetweenplantationforestryandwaterresourceshasoftenbeenacontroversialone.Scientificresearchconductedovertimeneverseemstobeable tosatisfybothadvocatesandopponents,sincetheconditionssurroundingeachplantationaretoounique togeneralise.IntheColombianAndes,SmurfitKappamanages45,000hectaresofplantationforests.ThesecommercialforestsareoftensituatedclosetourbanconcentrationsandconsistoffastgrowingspecieslikePineandEucalyptustrees.Thelandscapeischaracterisedbyaveryhumidclimate,soilssusceptibletoerosionandsteepterrain.Morethan550watercoursesoriginateinSmurfitKappa’sareaofmanagement.Thesestreamssupplysmallfarmsandmedium-sizedmunicipalities withwater.Mountainwatershedsintheregionusedto beemployedforgrazingcattle,butnowtheyhavebeenconvertedforuseinforestplantations.InordertodeterminetheinfluenceofcommercialforestplantationswithregardtothehydrologicalresponseofsmallwatershedsintheColombianAndes,boththeforestrySciencesDepartmentoftheMedellinCampusoftheNationalUniversityofColombiaandtheforestResearchDepartmentofSmurfitKappainColombiaestablishedapartnershiptodeveloparesearchprogrammeinforesthydrology.Sinceitsinitiationin2011theresearchprogrammehasbeenvisitedbymanyinternationalexpertsinthisfieldandhasbroughttogetherresearchers,students,politicians,farmersandenvironmentalistsinterestedintheprotectiveeffectofplantationsonwaterresources.Asaresulttheprogrammenotonlycontributestopracticalenvironmentalsolutions,butitalsohelpsatanacademiclevelinthesearchforhydro-solidarityandsocialsustainabilityintheColombianAndes.”

Professor Vasquez checking a pluviometer (rain gauge) in one of the forestry areas being researched.



Additionally,in2012wehadmeetingswithbothemployeesandcustomers,toshareinformation aboutthewiderangeandsignificantimpactofoursustainabilityactions.Apartfromthesemeetingsthereisalsoafrequentdialoguewithotherstakeholdergroupsinterestedinouractionsrelatedtoforestryandbiodiversity.forestrystudiesareactivelypromoted,wehavebeeninvolvedinnumerouspublicationsonforestryresearchontopicsrelatedtosilviculture,treebreedingandforesthealthforEucalyptusaswellastropicalandsubtropicalpinesoverthepastdecades.

InEuropewehaveidentifiedwhichofouroperationsareeitherwithinorincloseproximitytolegallyprotectedareasorareasofhighbiodiversityvalue.Wearetakingnecessarystepstoensureboththeenvironmentalprotectionandthesustainabilityofthesesensitiveareas.

ElevenofourEuropeansitesarelocatedwithinoradjacenttoareasthatarepartoftheNatura2000whichisanecologynetworkofprotectedareasintheterritoryoftheEU.TheNatura2000networkhasbeencreatedthroughEUlegislationin1992protectingthemostthreatenedhabitatsandspeciesacrossEurope.

Tenothersitesareadjacenttoorwithinareasprotectedbynationalorlocallegislation.Additionally,fourofouroperationsdrawfromordischargewatertowatershedsthatareprotectedorclassifiedassensitive.

Thelistcontainingthenamesandlocationsofthesesitescanbedownloadedfromourwebsite.

SMuRfiT kAPPA MillS ANd CONVERTiNG PlANTS CERTifiEd CHAiN Of CuSTOdy uNdER PEfC OR fSC OVERViEw SMuRfiT kAPPA CERTifiCATiON AT ENd 2012

VIRGIn PAPER

Production Ktonnes

Production capacity with

CoC certification

% certified paper

EUROPE

Kraftlinerproducts 1,485 100% 79%

Othervirginpapers(sackpaper,MGpaper) 252 100% 41%

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Kraftliner,printing&writingpaper,SCfluting 294 90% 90%

RECyClED PAPER & BOARD

Production Ktonnes

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% certified paper

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Containerboard 2,934 100% 100%

Solidboard&cartonboard 869 100% 94%

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Containerboard 640 69% 53%

Cartonboard 131 73% 28%

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Corrugatedpackaging 164 90%

Solidboardandcartonboardpackaging 9 100%

lATIn AMERICA

Corrugatedpackaging 19 70%

Cartonboardpackaging 2 67%

PaperSacks 4 80%

Thirty six years of forestry research at Smurfit kappa Cartón de Colombia

for36yearstheforestryResearchDepartment(“fRD”)hasbeenessentialforthedevelopmentoftheforestrydivisionofSKCC.Thisdepartmenthasevolvedinthreemainareas.

Tree breeding and genetic improvement research programme:ThefRDfocuseditsearlyeffortsontheintroductionandtestingofseveraltreespeciestosourcefibresforthecompanyproducts.Aseriesofprogenytestswereestablishedtocompareamongthedifferentspecies.Geneticimprovementisbasedonclonalforestryforeucalyptusinwhichthebesttreesareselectedandpropagatedthroughrootedcuttingsofthesametree;andfamilyforestryforpines,inwhichthebestseedlingsareobtainedthroughclosedoropenpolarisationoftheoutstandingtrees.Nogeneticmodificationpractices areused.

Silviculture and Productivity (S&P) research programme:Withtheacquisitionofthefirstfarms,newchallengesappearedsuchas,howmanytreestoplant,howtopreparetheland,whenandhowoftentocontroltheweedsandhowtosupplyadditionalnutrientstopreserveoramplifythegrowthpotentialobtainedthroughgeneticimprovement.

TheS&Presearchprogrammehasdevelopedthreecomputerisedapplications:(i)SMURFERC establishment,forcalculatingandoptimisingtheamountoffertiliserrequiredforplantingeachofthesixworkingspeciesinthe64differentsoilunitspresentinourlandholdings;(ii)SMURFERC maintenance,thatmakesitpossibletodetermine,throughfoliaranalysisatanearlystageinpineandeucalyptusplantations,thenutritionalstatusandgrowth,togeneratenutritionalmanagementsoptions;and(iii)CartóndeColombiaCarbonfixationProgrammeor3Cfix,anapplicationthatallowstheforestrydivisiontocalculate,withlocalgrowth-draincalculationsandphysiologicalindices,thecarbonfix andstocksoftheplantations,onayearlybasis.

Phytosanitary protection research programme:Asthenatureofourforestholdingschanged,thedifferentspeciesoftreewereexposedtoamorevariablesetofenvironmentalconditions.Overtime,variousdiseasesandpestsappeared,givingrisetoconcernsoverforestproductivityandfibrequality.Thephytosanitaryprotectionresearchprogrammewasstartedin1988 withtheaimofsolvingtheseproblems.Ithasthreemainworkingcomponents:training,prevention,anddisease &pestriskmanagement.


2. EffiCiENT uSE Of ENERGy ANd CARBON MANAGEMENT

Towards a low carbon economyIn2011,theEUpublishedroadmapstowardsacompetitivelow-carboneconomyby2050anditsenergyroadmap.Togetherwithotherpolicydocuments,overtimethiswillleadtoanewEuropeanclimatechangeandenergypackage.TheoutcomewillbecrucialforSmurfitKappaandourindustryasouroperationsareaffectedbyallthese(future)policies.ItisclearthattheEUcanmeetitsobjectivesinthisareaonlyifthereissufficientbiomassavailability.CurrentlyourindustryisthelargestuserofbiomassinEurope.Ourproductsare,althoughtoalargeextentmadefromrecycledmaterial,ultimatelybiomassbased.Ourindustryisalsothelargestandmostefficientgeneratorofenergybasedonbiomass.Thisisrealisedthroughtheextensiveuseofbiomassboilersthataremainlyfuelledbybiomassresidualssuchas bark,sawdust,thinningsandstumps.Since2010we havemadesignificantinvestmentsinbiomassboilers inNavarrainSpain,andasteamturbineinNervióninSpain.Althoughmostoftheseboilersareconnectedtotheproductionofpulpandvirginfibrebasedpaper,inseveralcountriessuchasSpainandfrance,governmentsaresupportingenergyandfossilcarbonsavingprojectsconnectedtorecycledpapermills.SmurfitKappasupportsandactivelyparticipatesinsuchprojects.

90%ofourfuelconsumptionconsistsofeitherrenewablefuel(biomass)ortherelativelylowCO2-emittingfossilfuelnaturalgas.In2012,42%ofallenergyusedwasbiomassbased.

Combatting climate change

Investing in efficient energy generation

CombinedHeatandPowergeneration(CHP)isthemostefficientmethodofproducingelectricityandheat(steam).Ourindustryisverysuitedtoinstalltheseco-generationunitsgivenourneedforbothelectricityandsteam.In2012,theproportionofourenergycomingfromCHPinstallationswasunchangedfrom2011.ThisistheresultofpositiveeffectsfromtheinstallationofnewCHPinstallationsinafewmillsandthenegativeeffectsofcertainexistingCHPinstallationsthatoperatedforvariousreasonsbelowtheirperformancelevelof2011.

OurNavarramillinSpainwasoneofthepapermillswhereweinvestedin2012inaboiler.Thegratefiredbiomassboilerhasbeenrebuilttoabubblingfluidisedbedboiler,resultinginthepossibilityofgenerating100%ofthesteamcapacitybybiomassinsteadof50%beforethere-build.Thisre-buildalsoresultedintheidlingofarelativelysmallgasfiredboilerwhichmeansthatallsteamnowpassesthesteamturbinebeforebeingusedinthemill,therebyincreasingtheCHPratiofor thismill.



Anotherexampleistheinvestmentinalargerturbine inourrecycledpapermillinBarranquillainColombiareplacingtwosmallerones.Beforetheinvestment,electricitywasgeneratedbythesetwogasturbineswithoutrecoveringthewasteheat.Thenewturbine alsohasawasteheatrecoveryunitinstalledwithitandthereforetheamountofelectricitygeneratedthrough aCHPinstallationhassignificantlyincreased.

InourrecycledpapermillinBarbosa(Colombia)awasteheatrecoveryboilerhasbeeninstalled.Thisboiler,whichisnowoperatingasastand-aloneboiler,willbecomepartofaCHPunittherebyincreasingtheamountofelectricitygeneratedthroughaCHPinstallation.

OurrecycledpapermillinBirminghamintheUKinstalledamotorthatisfuelledbybiogasgeneratedintheon-sitewastewatertreatmentfacility.Themotoralsohasawasteheatrecoveryunitinstalledwithit.Previously,thebiogaswasburnedinasteamboiler.Thisalternativeuseofthebiogasresultedinmoreelectricitygeneratedby aCHPinstallationthanbefore.

Investing in energy reduction initiatives

In2011,weconcludedaninternalstudythatgenerated anoverviewofall(theoretical)possiblesavingsonenergyneedsandfossilCO2 emissionsperpapermill.InthatstudyallourEuropeanandLatinAmericanpapermillswereanalysed.for2013weplantoanalyseourboardmills aswell.ThelistofenergyandCO2 savingopportunitiesresultingfromthisstudyformsthebasisforenergyandCO2 reductionrelatedinvestmentsinthecomingyears.MostidentifiedprojectstoreduceenergyuseandfossilCO2 emissionsarepartoflargerinvestmentswhichwill beexecuteddependingontheireconomicfeasibility.

In2012,severalinitiativestoreducetheuseofenergywereapprovedand/orexecutedasthefollowing examplesshow.

Asshownonpage37,atourrecycledpapermillinHoya inGermany,wehaveinvestedinthepapermachinesince2011,notonlytoexpandthecapacitybutalsotoreduceenergyusage.forexample,afilmpresswasinstalledin2011,leadingtohigherenergyefficiency.Anothermodificationmadetothepapermachinein2012was theinstallationofaheatrecoverysysteminthehood,replacingsteambywasteheat.Lessenergyisnowneededtoevaporatethewatercontainedinthepaperduringproduction.

Anotherexampleofenergyreductionistheinstallationof ashoepressinoneofthepapermachinesatourrecycledpapermillInCerroGordoinMexico(seepage36).

In2012,theenergyintensityonapertonnebasisofourpaperandboardproductiondecreasedby3.5%comparedto2011.

Alsoinourconvertingoperationsmanyinitiativestoreduceenergyusagearetaken.Examplesofsuchinitiativescanbefoundonpage38.

Energy,CO2 emissionsandotherairemissionsrelateddataarereportedforallouroperations(includingdetailsforindividualmillsinEuropeandLatinAmerica)inthetablesonpages78to84.Thosetablesreportenergyconsumptionfortheproductionofthepaperorboardmanufacturedwhilethetwoinput/outputtablesonpage76(Europeanoperations)andonpage77(LatinAmericanoperations)reportthetotalenergyconsumptionofthesite,takingintoaccountthefuelsusedtoproduceelectricityand/orthermalenergysoldexternally.Themethodsappliedforcalculationsaswellasdetailsonspecificdefinitionsaregivenintheglossaryonpages94to96.

Investing in fossil CO2 emission reductions

OurtotalfossilCO2 emissions(directandindirect)decreasedin2012by63,000tonnescomparedto2011.Comparedto2009,ourtotalfossilCO2 emissionshavebeenreducedby218,000tonnesrepresentingadecreaseof6%.Thereductionin2012hasbeenachievedbyloweremissionsbythemillsystemsbothinEuropeand LatinAmerica.

ExamplesofmillsinEuropethatcontributedtothisreductionareHoyainGermany(heatrecoverysystem),NervióninSpain(installationofanewsteamturbine)andNettingsdorferinAustria(shiftfromtheuseofheavyfueloiltonaturalgasinthelimekiln).

forLatinAmerica,CO2 emissionreductionswereachievedbyCerroGordo(installationofashoepress),Barbosa(installationofa(wasteheat)boilerusingnaturalgasandreplacingcoal)andBarranquilla(installationofaCHP).

HistorictrendsinthefossilCO2 emissionsforbothEuropeandLatinAmericaareshowninthegraphsonnextpage.

Toreachthetargetof20%reductionoffossilCO2 emissionsrelativetoproductionby2020therearepotentialprojectsidentifiedintwomainareas.firstly,projectsthatwillreducetheneedandusageofsteaminthepapermachines,andsecondlythosethatwillbringmoreefficientuseoffossilfuels,mainlybyadditionalinvestmentsinCHPcapacity.ThesepotentialadditionalinvestmentsinCHPinstallationswilldecreaseCO2 emissionsinSmurfitKappaandwillalsocontribute toafurthershifttobiomassusageasfuel.

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CdPFrances Way Co-ChiefOperatingOfficerProgrammes CarbonDisclosureProject(CDP)

“CDPisanindependentglobalcharitythatworkswithinvestors,companies,andgovernmentstodriveenvironmentalactionthatwilldeliverasustainableeconomy.Wewerefounded12yearsagowithafocus oncatalysingcorporatetransparencyfromtheworld’slargest500companiesontheircarbonemissionsandenergyuse.Asaresultnowmorethan4,100ofthelargestlistedcompaniesacrossmostofthemajoreconomiesdisclosetheirclimatechangeimpactsandstrategiesthroughCDP.Wealsohaveasupplychainprogrammetoallowmajormultinationalpurchasingorganisationstomanageclimaterisksacrosstheirglobalsupplychains.Besidesclimatechangewearenowalsoworkingonwaterandforestsprogrammes.Energy,water,climatechangeandforestsareintrinsicallylinked.Theimpactsoftheseissuesgobeyondthedirectoperationsofacompany.SmurfitKappahasbeenreportingtoCDPonclimatechangesince2008.In2012SmurfitKappa’semissionsreportingwasofgoodqualitywithbreakdownsprovidedbycountry,facilityandbusinessdivision,whichmakesitpossibletofocusonreducingthoseemissions.Emissionsreductionswereachievedthroughspecificreductionactivities.ClimatechangeisintegratedintothebusinessstrategyandthisisreflectedinSmurfitKappa’sabilitytoidentifyopportunitiesaswellasrisks.CDPsuggeststhatSmurfitKappashouldstrengthenitsemissionsreductiontargettoanabsolutetargetandconsiderawardingincentivesforstaffresponsibleformanagingtheseissues.ThenextchallengeshouldbefurtherreportingonScope3,especiallyemissionsfromsuppliers.DeforestationisakeyissueforSmurfitKappa’sbusinessmodelandensuringwoodisprocuredresponsiblyisachallengeSmurfitKappashould addressandreporton.”


United Kingdom: New lightweight paper machine in Townsend Hook will reduce CO2 emissions

Weannouncedin2012thatwewillinstallamodern,fivemetrelightweightrecycledcontainerboardmachineattheTownsendHookmillinthe UnitedKingdom.

Byinvesting€115millionin2013and2014,the twoexistingpapermachineswillbereplacedbyonenew,stateoftheartpapermachine,increasingtheproductioncapacityofthemillby20,000tonnesto260,000tonnesperannum.Itisexpectedthatthis newenergyefficientpapermachinewillsave25,000tonnesperannumondirectCO2emissions.Thestart-upofthemachineisplannedforquarter4,2014and itsproductionisintendedtomeetthegrowingdemandforsustainable,lowerweight,highperformancepackagingpapers.Lowerweight,highperformancepackagingpaperscontributetooptimisingtheenvironmentalfootprint ofthesupplychainofourpackagingcustomers.

3D picture of the new building at Smurfit Kappa Townsend Hook which will house the new paper machine.

Mexico: Paper mill cuts GHG emissions by using less steam

OurCerroGordoMillislocatedinthemetropolitanareaofMexicoCity,oneofthemostpopulatedareasintheworld.Geographically,itissituatedinabasinwhichinhibitstherapiddispersionofairemissions.Industrialoperationsarethereforesubjecttostringentenvironmentalregulationsregardinggreenhousegasemissions.

Withinthisstrictregulatoryenvironment,theCerroGordomillrealisedasignificantfossilCO2 emissionreductionthroughaninvestmentinanewshoe-pressonitsPM5machineinJanuary2012.TheabsolutereductioninfossilCO2 emissionsfromthePM5isover4,300tonnesperyear.

TheMexicanmillproducesrecycledpaperforcorrugatedboxesandfoldingcartonforpackagingforalltypesofindustry.Thevariousgradesofrecycledpaperarenowproducedwithlesssteamthankstothenewshoe-press. Asaresult,thepaperenteringthedryingsectionofthepapermachineholdslessmoisturethusallowingincreasedproductionspeedandlowersteamconsumption.Lessusageofsteamtranslatesintosavingsonnaturalgasconsumption.InturnthisresultsinlessCO2 emissionsandreducesthecarbonfootprintoftheCerroGordoMill.

Colombia: Cali mill reduces CO2 emissions and improves energy efficiency

OurvirginpulpandpapermillinCalirecentlyreplacedtheexistinglimekilninwhichCalciumOxide(CaO)forthepulpproductionprocesswasproduced.Theoldlimekilnwasoperatingwellaboveitsdesigncapacityduetoseveralmodifications.Insteadof55tonnesofCaOperday,itproducedbetween130and150tonnes.Thisledtorelativelyhighfuelconsumption.

Thenewlimekilnisfiredwithnaturalgas,whereastheoldlimekilnwasusingheavyfueloil.Boththeefficiencyimprovementof60,000GJandtheuseofacleanerfuelwillleadtoadecrease ofapproximately13,000tonnesofdirectCO2 emissions.Productionisexpectedtoincreaseto160tonnesofCaOperday.Odoursarereducedbyburningnon-condensablegasesgeneratedintheprocess.Thenewlimekilnisalsoequippedwithanelectrostaticprecipitatorwhichreducesdustemissions.

The new shoe-press on PM5 machine at the Cerro Gordo paper mill, Mexico, helped to realise significant reduction in fossil CO2 emissions.

The new lime kiln at the Cali mill, Colombia led to a decrease of CO2 and dust emissions.


Germany: Hoya ready for the future making paper with lower CO2 emissions

OurpaperandboardmillinHoya,Germanyhasbeentransformedmanytimessinceitbeganitsoperationsin1957. Themillproducescontainerboardandcoatedboardontwomachines.Bothmachinesuse100%recycledfibreastheirrawmaterialsource.Tokeeppacewithevermoredemandsonspeed,outputandefficiency,itrecentlycompleteda two-phasetransformationprojectofthecontainerboardmachine,thusmakingitreadytomeetfuturemarketdemands.

Theobjectiveoftheinvestmentsinphaseonewastosignificantlyincreasethespeedandtodecreasedowntimeandmaintenanceofthemachine.TheseinvestmentsincombinationwithanewenergyrecoverysysteminthehoodandfilmpresshavealsoledtoasignificantreductioninspecificenergyusageanddirectCO2 emissions.

Withthecompletionofthesecondphaseofthismulti-yearinvestmentprojectthecontainerboardmachineisnowabletoproducelowbasisweightpackagingpaper,allowingthepackagingoperationstooffersolutionstocustomerswithlessenvironmentalimpact.ExtendingthecurrentCombinedHeatandPowerplanttowardstheendof2013withanadditionalgasturbineandawasteheatrecoveryboilerwillminimisetheuseofelectricityfromthegridandhencedecreasesignificantlyindirectfossilCO2emissions.

The netherlands: Rofire – a first class secondary fuel

Weaimtominimise“sidestream” volumessenttolandfill.OurpapermillinRoermond,theNetherlandshasfoundanexcellentwaytocapturethevalueofsuchsidestreams.Themilluses100%recoveredpaperasrawmaterialtoproducerecycledpaper.Recoveredpapercontainsmainlypaperfibres,butalsopaperclips,staples,textile,ropes,woodandplastic,whichconstitute“sidestreams”ofextraneousmaterial.Themillusesprocessestoenhanceseparationofthesesidestreamsandthelocalcrewhasidentifiedusefulapplicationsforallstreamswitha99.5%successrate.

In2000,theRoermondmillinvestedin anon-sitefacilitytoconvertnon-useableorganicmaterialsintoafuelpelletwithahighcalorificvalue:Rofire.Thissecondaryfuelis50%bio-basedandcanbeusedasasubstituteforcoalinthelimestoneindustry,forexample,therebysaving20,000tonnesfossilCO2 emissionsannually.

The on-site facility at the Roermond paper mill in the Netherlands to convert otherwise unusable organic

materials into a high calorific fuel pellet: Rofire.

Inside our paper and board mill in Hoya, Germany.


ENViRONMENTAl iNiTiATiVES iN CONVERTiNG OPERATiONS

Most of our energy and water usage takes place in our global paper and board mill system. We operate a manifold number of converting operations that use, compared to our paper and board mills, relatively less energy and water. nevertheless, in these operations management is committed to be efficient in the use of energy and water discharge as is illustrated by the following examples:

Czech Republic: Sensor lights make sense

OurCorrugatedConvertingoperationinŽebrákintheCzechRepublicinvestigatedwhetherlightinginpartofitsbuildingscouldbeimproved.

Newsensorlightswereinstalled inoneoftheproductionhalls,cuttingbackonenergyusedwhilealsoreducingthegenerationofheatresultingfromtheoriginallightingsystem.Atotalofelevennewlightpanelsnowmakesurethattheenergyrequiredtolightthehallisreducedby50%.ThesensorlightsdirectlydecreasethecarbonfootprintofSmurfitKappaCzechandatthesametimeimprovethesafetysituation,sincethelightsproducefarlessheat.Soonotherhallswillalsobefittedwithsensorlights.

Colombia: Corrugated plants reduce use of energy

ThankstotheenvironmentalcommitmentofallourcorrugatedplantsinColombia,significantimprovementshavebeenachievedwithregardtosustainabilityissues.Thefocusoftheplantsonenergyreductionandalsochemicals,likeglue andink,hasbeenasuccessfulone.

IntheMedellínplantsteamcontrol valveswereinstalledinthedoublebackerachievinga20%decreaseofnaturalgasconsumptioncomparedto2011.Thechangesalsoimprovedproductqualityandreducedoperatingcosts.Similarly thecorrugatedplantinBogotáinstalled asystempoweredbyprocessorsintheboiler,whichreplacedthetraditionalmechanicalsystem.Themeasureoptimisestheair-fuelratio,improvescombustionefficiencyandreduces gasconsumptionandhenceemissions.furthermore,apumptorecovercondensatesfromthecorrugatorwasinstalled.Gasconsumptiondecreased by6%from2011to2012.

United Kingdom: Sustainable energy and electricity savings

OursheetfeedingplantsintheUKhavebeenreducingtheircarbonfootprintinrecentyearswhichismostevidentintheirenergyreductionprojects.In2008,theSheetfeedingsitessetafiveyeartargettoachievesavingsandreducecarbonemissionsthroughinnovation,efficiencyandemployeeengagementatitsthreemanufacturingplants.Theprocessbeganin2008usingasinglelocationasapilot,establishingbestpracticeandrollingitoutacrosstheregion.Thesuccessoftheapproachresultedinsignificantsavingsinenergyandwaterusage.Inthethreeyearsaftergolivetherewasareductionof24%ingasconsumptionand22%reductioninelectricityusage.Manyoftheseideasforimprovementhavenowbeen‘rolled-out’throughtheSmurfitKappaGroup.TheachievementoftheCarbonTrustStandardinSheetfeedingwasanotherfirstinadditiontothebusinessbeingthefirstsheetfeederintheUKtogainfSCandPEfCcertification.BuildingontheSheetfeedingcertification,SmurfitKappaUKbecamethefirstmajormulti-sitedpackagingcompanytobeawardedtheCarbonTruststandardintheUK.

ENERGy

Steam boiler at our corrugated plant Smurfit Kappa Turnhout, Belgium.


ENViRONMENTAl iNiTiATiVES iN CONVERTiNG OPERATiONS

Colombia: Good practices boost sustainable performance

OurCorrugatedplantinBarranquilla hasaccomplishedsizeablereductions intheusageofwater(32%),theuseofelectricity(23%)andintheconsumptionofgas(30%)in2012comparedto2011.

TheprogrammeinBarranquillademonstratesthatgoodteamwork andproductionpracticescanboostproductivityandreducetheenvironmentalfootprintofacompanyatthesametime.Awarenessprogrammesforpersonnelincombinationwithefficiencychecksofvariouspartsof theproductionprocesshaveledtoemployeespro-activelytacklingenergyissues,thereplacementofnon-efficientmachineryandunnecessaryusageofelectricity,gasandwater.Simplemeasureslikeclosingmachinesections,switchingoffun-usedmachineryandimmediaterepairshadasignificanteffect.Continuousmonitoringwasvitaltoachievethesegoalsandisnecessarytoguaranteeasuccessfulcontinuation ofthisprogramme.

Mexico: water use efficiency and reuse in Culiacán

OurplantinCuliacánislocatedinanareawithasemi-aridclimate.Althoughannualrainfallisover600millimetres,thehighaverageannualtemperaturescausessignificantevaporation.Sustainablewatermanagementthereforeisanimportantissueattheplant.

Newinitiativeshaveimprovedtheefficiencyofwaterusageby48% in2012comparedto2011.Waterconsumptiondecreasedfrom1.19m3/tonnein2011to0.62m3/tonneofsaleableoutput.Processwaterdischargedwasreducedfrom0.32to0.18m3/tonnesaleableoutput.Thiswasrealisedbyclosingwaterjacketcircuits inthecorrugator’ssinglefacersandbyreusingwashwaterinstarchadhesivepreparationandthewashingofprintingplates.forthewatertreatmentprocessanelectrocoagulationprocesswasimplemented.Theuseofpotablewaterinsanitaryservices,insteadofusinguntreatedsuperficialwater,improvedhealthandsafetyconditionsanddecreasedthesanitarywaterdischarge.

Ireland: Smurfit kappa display on a mission to reduce emission

In2009,SmurfitKappaDisplayconcludedthattheireffluentdischargesneededto beadjustedtoreducetheamountofchemicalsenteringtheSouthDublinCountyCouncildrains.TohelpprotecttheenvironmenttheOperationsandHealthandSafetydepartmentsofthisSmurfitKappaplantresearchedthematter.

fortnightlysamplesweretakenfrom thedrainsandtestedtoidentifyanydischargesoverthepermittedlimits. Thefirsttensamplesin2010identifiedeightsuchcases,allcomingfromCOD andBOD.Eventuallytheprocessbywhichchemicalswerebeingusedwaschanged.Aneightstepprogrammewasinitiatedthatentailedmeasuressuchasinstallingnewequipment,raisingawarenessamongemployeesandreplacingtheinkwithamorebiodegradablealternative.Afterintroducingthesemeasuresin2012thesitemanagedtostaywithintherequiredeffluentlimits,toimproveefficiencyandenhancetheprotectionofthelocalenvironment.

wATER

Water treatment system at our folding carton plant Smurfit Kappa Baden Packaging in Weisenbach, Germany.



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Emission from transportInEurope,wecalculatedtheCO2 emissionsrelatedto thetransportofthemainrawmaterialstoourmillsandconvertingplants.Transportationofourrawmaterials andproductsismostlyoutsourcedtoexternalparties.

Thisincludestransportofwood,recoveredpapersandmarketpulpusedinourmills.Thetransportofrawmaterialstothesecondstageofthesupplychain(reelsofpaper,corrugatedboardsheets,solidboardsheets,plasticfilmsandotheritemstotheconvertingplants)isalsotakenintoaccount.

WhilethecalculationofCO2 emissionsforthetransport ofpaperreelsbetweenourownmillsandtheconvertingplants(representing71%oftotalvolume)isaccurate,webelievewehavemadeagoodestimateofemissionsforthetransportoftheremainingreelsofpapersuppliedtoourcorrugatedplantsbyexternalparties.

for2012,CO2 equivalentsfortransportofrawmaterialsamountedto212kTonnes.Thebreakdownbymode oftransportisshowninthegraphsabove.TheCO2 emissionfactorsbytransportmodeareextractedfrom theEuropeanReferenceLifeCycleDatabaseversionII(ELCD).Transportationfortheaboveactivitiesrepresents 6.2billiontonne-kilometresandthepie-chartdisplaysthesplitbytypeoftransport.54%ofourtransportneedsarecarriedoutbyroad,37%byseawiththebalancecarriedoutbytrain.

WehavenotbeenabletodoasimilarexerciseforLatinAmericaduetothestructureofoursupplierbase.Weareintheprocessofestablishingtheparametersofthejourneystoandfromourpapermills.

3. wATER MANAGEMENTWaterisavitalelementinourmanufacturingprocess. Asfreshwateravailabilityisagrowingglobalconcern, westrivetolimitwaterintakewherewecan,eventhoughthevastmajorityofourproductionlocationsarelocated inareaswithnoforeseenwaterscarcity.Wearealsocommittedtoreturnthewaterusedinourprocessesascleanaspossibletothepublicwatersystems.90%ofthewaterusedisactuallyreturnedtothesesystemsingoodconditionandmostoftheremainingwaterevaporatesand

returnsatalaterstageasprecipitationintotheglobal(fresh)watersystems.furthermore,ingeneral,thewaterwetakein,isusedmultipletimesbeforeitistreatedinourwatertreatmentfacilities.forexample,ofallwaterthatisinusebyapaperandboardmillatanypointintime,98%isbeingre-usedbeforebeingtreated.

Underpinningourcommitment,weinvestinthebestavailabletechniquestotreatthewaterbeforereturning ittothewatersource.Since2005,wehavemadeconsiderableeffortsandsizeableinvestmentsinupgradingitswatertreatmentfacilities.Oneofourlargestpapermills,ZülpichinGermany,isoperatinga100%closedloopprocesswatersystem.

water performanceOurglobalpaperandboardmillsystemused124millionm3 ofwaterin2012,over98%ofourtotalwaterintake.Thebalancewasusedinourglobalconvertingsystemwhichrequiresverylimitedamountsofwaterrelativetoproductionvolumes.Ourtotalintakeofwaterispracticallystablesince2010,butis10%lowercomparedto2008.Therearetworegions,whereouroperationsfacewaterscarcity.MexicoandthesouthernpartofSpain(Andalucía).Ourmillsinthoseregionsplacespecialattentiontolimitingtheirwaterintakeasmuchaspossible.forexample,ourrecycledmillinMonterrey,locatedinNortheastMexicoin asocalledsemi-aridclimateregion,initiatedaprogrammetwoyearsagotolessenitswaterintakeachievingadecreaseof40%inwaterintakepertonneofpaperproduced, seedetailsonpage43.

followinginvestmentsofover€31millioninwatertreatmentfacilitiessince2005,thequalityofwaterdischargedbyourglobalpaperandboardmillsystemhasimprovedonarelativebasisby25%.WeusetheCOD(ChemicalOxygenDemand)contentasmeasureforwaterquality.Comparedto2011,ourCODperformanceimprovedin2012by5%mainlyresultingfromthecommissioninginApril2012ofanewwatertreatmentfacilityinthepapermillinBernalinArgentina.ThenewfacilityallowedtherelativeCODcontentofBernaltodecreasebyover60%in2012comparedto2011.AnothersignificantimprovementwasrealisedinourpapermillinAniainItaly.Throughtheextensionofthewatertreatment

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facility,AniareduceditsCODdischargeby18%in 2012comparedto2011.Otherpaperandboardmillsoperatedtheirwatertreatmentfacilitiesaccordingtoexpectedlevels.

ThetwootherindicatorsmeasuringtheorganiccontentofwaterdischargedareBOD(BiologicalOxygenDemand)andTSS(TotalSuspendedSolids).TheseindicatorsshowedthesameperformancetrendastheCODindicator.Theso-calledeutrophicationindicators(nitrogenandphosphorus)remainedstablein2012comparedto2011.

Ingeneral,thewaterthatwedischargefromourpaperandboardmillshasbeentreatedinwatertreatmentfacilitieson-site.Insomeinstanceswaterisbeingdischargedtocommunitywaterdischargefacilities.Ingeneral,afterthewateristreatedon-site,itisdischargedtothesurfacewatersystemssuchasrivers,lakes and/orsea.

Over50%ofthevolumeoftheprocesswaterdischargedbyourpaperandboardmillsystemisbiologicallytreated,approximately10%isdischargedtoexternalcommunitytreatmentfacilitiesandthebalancereceivesphysicaland/orchemicaltreatmentbeforebeingdischarged.

water dataThetreatmentoftheprocesswaterusedinthemillsiseithercarriedouton-site,asisthecaseofthemajority ofourmills,orissubcontractedtoanexternalthirdparty.forthelatter,inalldisclosuresrelatingtotheprocesswatercontent(COD,BOD,TSS),wereportlevelsinthewaterdischargedbythemillspriortothisexternaltreatment.

ToprovideacorrectoverviewoftheGroupperformanceforallwaterindicators,BODdischargedisestimatedforourpapermillinNervióninSpainbyusingCODdischargeincombinationwiththeratioCOD/BODobtainedfromasurveyperformedduring2012inthismill.

Waterrelateddataforallouroperations(includingdetailsforindividualmillsinEuropeandLatinAmerica)areshowninthetablesonpages76to83.

Cellulose du PinIn2012,ourCelluloseduPinkraftlinermilllocatedinBiganosinfrance,facedthecollapseofoneoftheblackliquorstoragetanksresultinginthereleaseofeffluentontothegroundsofthefacility.Immediateactionwasundertakentocontainthespillage.

Nophysicalinjurieswerereported,howeverlimitedpollutionofthenearbyriverwatersdidoccur.Thiswasdetectableonlyforashortperiodthankstothelimitedquantityofeffluent(approximately100m3ofblackliquor)thatspilledintotheriverwaters.Thisspillageresultedinarelativelimitedquantityofapproximately300kgofdeadfishcollected.Sitemanagementkeptinclosecontactwiththelocalauthorities.BrunoLafon,MayorofBiganos,stated:“Thedialoguewiththefactorymanagementwasconstructiveandtheireffortstoresolvetheproblemsthatresultedfromtheincidentwereextensive.”Toensureasafemillrestart,alltanksconcernedwereauditedbyathirdparty.Thisactionledtoasevenweekshutdownofthemill.AcommitteecomprisingSmurfitKapparepresentativesandlocalstakeholderswillmonitorthemill’soperationsbymeetingatleastonceperyear.Themillwillalsoinitiateandfundanindependentandpublicsurveyontheimpactoftheproductionactivitiesontheenvironment.Despiteuncertaintyastothecausesofthecollapseoftheblackliquortank,themillimmediatelycoveredthedirectfinanciallossesofsurroundingbusinessesaffectedbythespillage.

TheenvironmentaldatarelatedtoCelluloseduPinreportedonpage78areinclusiveofthewaterdischargesandthewastesgeneratedduringtheclean-upperiodfortheincident.Dataalsoincludethewaterdischargedwhichwasusedtoremovetheeffluentkeptintheon-siteemergencypondaftertheincident,incompliancewithCelluloseduPin’senvironmentalpermit.Atotalof5,063tonnesofliquidscontainingblackliquorresultingfromtheincidentwaseventuallyincineratedexternallyand isreportedashazardouswaste.


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Mexico: Monterrey Mill saves water in a water sensitive area

TheMexicancityofMonterreyisgeographicallylocatedinanareawhichhassufferedseveredroughtsinrecentyears.Asaresulttherearestrongpressuresonwaterresourcesandwaterusageisexpensive.TosavewaterourpapermillinMonterreyhasinitiatedatwo-yearprogrammewhichhasdecreasedthefreshwaterintakeneededtoproduceonetonneofpaperbyover40%.

Torealisethisreduction,changesweremadetothewatercircuitsandcleaningshowersofthepapermachinePM9.Themillhasalsoincreasedthereuseofprocessandprimarytreatedwater,thusincreasingtheclosureof thewatercircuitsanddecreasingfreshwaterusageforpreparationofprocesschemicals.Besidesthedecreasedwaterintake,watercostsdroppedby36%andthesaleableproductionincreasedbyalmost10%.

Italy: Ania paper mill upgrades water treatment plant

During2012ananaerobicreactorwithabiogasdesulphurisationunithasbeencommissionedandinstalledattheAniapapermillinTuscany,Italy.Comparedtothepreviousyearthemillachieved asignificantreductionof18%oftheChemicalOxygenDemand(COD)loadintheeffluent.

Accordingtotherecordsofthefirstfivemonths ofoperation,theAniamillobtainedanoverallreductionoffossilsourceenergyusageofabout100tonnesofoilequivalentpermonth.Thiswastheresultofmakinguseofthegeneratedbiogasburnedintheboilerhouseinsteadofnaturalgas,andalsoaconsequenceofareductionintheuse ofelectricityintherestofthewatertreatment plantareacomparedtotheprevioussituation.

Raggers of PM9 pulpers collect large amounts of strips of plastic and other materials, which require specialised recovery.

The anaerobic reactor with biogas desulphurisation was installed at the Ania paper mill in Italy during 2012.


SOCIALDEVELOPMENT

forthesecondsustainabilityelement–People–ourprimaryfocusisonouremployees.Ourownemployeesarethekeytooursuccessandtheyareattheheartofourbusiness.Weoperateinhighlycompetitivemarketsandwecannotsucceedwithoutahighlyskilled,welltrainedandcommittedemployeebase.Tooperateinaproductiveway,itisapre-requisitethatouremployeescanworksafely.Bydevelopingandempoweringourpeople,weaimtocreateaworkenvironmentinwhichtopperformanceandpersonalgrowthofouremployeesgohand-in-hand.

Toreachthesepre-requisitesandobjectivesweaimtobesociallyconsciousandpro-activeonsocialissueswithacommitmenttocontinuousimprovementintheareasofhealthandsafetyandfocusonthewell-beinganddevelopmentofouremployees.Safeguardinghumanandotherelementaryrightsthatgovernlabourrelationswithouremployeesalsoformakeyelementofoursocialresponsibility.

Involvementinlocalcommunitiesisanotherkeypriorityforus,asweareoftenseenasanimportantpartnerinthelocalsocietyandeconomy.Ourobjectiveistocontributepositivelytotheeconomicandsocialdevelopmentofthesecommunitieswhereweareprivilegedtooperate byprovidingjobsandrespondingtothecommunities’socialneeds.Westrivetobeanintegralpartofthecommunitieswherewearelocated,bysupportingcommunityactivitiesandcommunitysupportprogrammes.

1. HEAlTH ANd SAfETyOccupationalhealthandsafetyisoneofourkeysustainabilitypriorities.Weareaimingforzeroaccidentsandweareaddressingthevariousaspectsofhealthandwell-beingatwork.IncreasinglywearebroadeningoureffortstoalsomakepeopleawareofHealthandSafetyissuesoutsideworkandintheirprivatelives.Therefore,ourHealthandSafetyPolicy,designedinaccordancewiththeOHSAS18001HealthandSafetyManagementSystem,containsaDeclarationofIntentinwhichwecommittoconductourbusinessinaresponsiblemanner:takingcareofthehealth,safetyandwellbeingofeveryoneaffectedbyouractivities.

Keyelementsinensuringthatthiscommitmenthasbecomeandremainsaday-to-dayfocusinclude:

nHavingHealthandSafetyasanimportantagendaitemonallrelevantmanagementandemployeemeetings.

nHavingHealthandSafetyasakeyelementby whichallmanagersaremeasured.

nBenchmarkingofinternalHealthandSafetyperformancethroughmonthlymeasurements.

nSeekingimprovementsinourcurrentworkingpracticesinordertoreduceriskandhelptoprotectemployees,visitors,contractorsandthepublicfrominjuryandill-healthbycontinuouslyassessingourprocesses.

nTakingallpracticalstepstodevelopandmaintainanappropriatesafetyculturethroughoutSmurfitKappa.Thisincludes:

l CirculatingreportsofallsignificantaccidentstoeverymanufacturingplantGeneralManagerandonwardtoouremployees.Inthisway,experiencesaresharedinordertohelpthepreventionofsimilaraccidentselsewhereinSmurfitKappa.


Bent Petersen, Bent Mærkmose , Bo Asmussen, Birgitte Dam and Jane Østergaard from Smurfit Kappa Denmark.


Social development [continued]

l ConductingcrossauditsinHealthandSafetyusingourownin-houseHealthandSafetycoordinators.

l ProvidingHealthandSafetybriefingsandtrainingsessionstoallnewemployees.

l ConstantlyreinforcingtoallemployeestheCompany’sexpectation,thatinthecourseoftheirwork,eachandeveryemployeewillfollowallsafetypolicies,useallrelevantsafetysystemsandcontinuallyseekoutwaystoimproveprocessestoensuretheHealthandSafetyofall.

formoreinformation,seetheHealthandSafetyPolicyStatementonourwebsite:www.smurfitkappa.com.

In2012,Group-wideinitiativesincluded:

nEmphasisonriskanalysisandhazardidentificationacrossourplantstructure:

l Manyofourplantshaveequipmentforwhichmaintenanceorcheckingactivitiesneedtobecarriedoutontheroofsoftheirbuildings.In2010,weinitiatedaprogrammetoequipourroofswithsafetyandsecuritydevicestosafeguardthesafetyofthoseperformingmaintenanceandcheckingactivities.Themajorityofourplantshavenowequippedtheirroofswithcollectiveprotectiontopermitaccesswithoutrestriction.

l Therestrictionofaccesstostores/warehouseswhenforklifttrucksareinuseisbeingimplementedinmanyofouroperations.Pedestriansareallowedtoaccesswarehousesonlyafterreceivingnotificationthatactivityoftheforkliftshasbeensuspended.Inaddition,allnewforklifttrucksarenowequippedwithspeedgovernors/speedlimitersandotherdevicestoreducetherisktoboththedriversthemselves andtopedestrians.Additionaldevicessuchasobstacledetectionor“bluelight”deviceshavebeeninstalledinordertoincreasethesafetylevelofouroperationswithforklifttrucks.

l Continuedemphasisisbeingplacedontheseparationofpedestrianpathwaysandvehicles,bothindoorandoutdoor.

l IntroductioninourplantsofGroup-widestandardsinrespectofsafety-relatedpaintingandsignagedesignanddisplay.

nThefirstBiennialSafetyOpinionSurveyheldinitiallyin2010,inbothEuropeandLatinAmerica,aimedatcollectingourownemployees’opinionsontheirperceptionofsafetyinsidetheirdepartmentand/orplant.Theresultsofthissurveyenabledustoidentifyopportunitiestofurtherimprovetheefficiencyofoursafetymanagement.Asecondsurveywascarriedoutin2012.Theresultswerebenchmarkedagainstthefirstsurveyfrom2010andshowedthat,atagloballevel,wewereimproving.Ouroperationsarenowidentifyingwhatadditionalactionsintheareaofsafetyshouldbetakentoreachafurtherimprovedlevelofsafetyandsafetyperceptioninour 2014survey.

n Continuedfocusonactivitiessuchasstandardisationoftheapproachtoriskanalysisinoperationsanda“STOP/THINK/GO”approachto/forassessingriskincertainsituations.

n Thereportingofnearmissesisnowpartofstandardreportinginourplants.Weconsiderthisakeydevelopmenttoachievefurthersafetyimprovements.Inaddition,ourGroupaccidentreportingtoolwasupgradedin2012,sothatthesenearmisseswouldalsobereportedcentrally,allowingustoshareinformationimmediatelythroughoutallofourfacilities.

nTheuseofE-Learningforsafetyiscurrentlybeingdevelopedasacomplementarytooltotraditionaltrainingofouremployeesandsubcontractors.

InadditiontotheseGroup-wideandRegionalinitiatives,individualplantshaveintroducedtheirownHealthandSafetyinitiativesduring2012suchashealthcheck-upsforemployeesandtheirfamilymembers,first-aidtrainingforemployees’familiesandsafetyriskassessmentsofemployees’houses.

Inaddition,employeesarebeingencouragedtobecomemoreconsciousoftheimportanceoftheirpersonalHealthandSafetyinawidercontextandtodevelopawarenessofrisksnotonlyduringworkinghoursandincommutingtoandfromtheworkplacebutalsointheirhomesandnon-workrelatedsocial/sportingactivities.

Inthisregard,wehavesupportedanumberofinitiativesacrossEuropeandLatinAmericafocussingonincreasingawarenessandfosteringappropriatebehaviourwithregardtosafety.


SeveralcampaignshavebeenlaunchedbothinEuropeandinourLatinAmericanfacilitiestopromoteahealthylifestyleandthebenefits ofhealthchecks.

Thesafetyofpeopleonourpremisesisakeypriority.Wedevoteconsiderabletimeandeffortspromotinganawarenessofhealthandsafetysothatouremployeesandalsosubcontractedworkersfollowtheappropriateprocedures.Itiswithgreatregret,therefore,thatwereporttwofatalitiesofsubcontractworkersduring2012,oneinEurope(Spain)andoneinLatinAmerica(Venezuela).

InSpainthefatalaccidentoccurredwhenthesubcontractworker,whowasemployedbyoneofourcleaningcontractors,triedtoperformacleaningtaskonabeltconveyorsystemwhichhadnotbeenstopped.InVenezuelathesubcontractworkerwaspartofanelectricalcontractorcrew;theworktobeperformedwastoinitiatesomeelectricalconnectionsinanareathathadbeenisolated,unfortunatelythevictimapproachedtheincorrectelectricalpanel,whichwasfullyelectrifiedandsustainedfatalinjuries.

During2012,50%ofourEuropeanfacilitiesremainedfreeofanylost-timeaccidentsand22%ofthesefacilitieshavesucceededinmaintainingazerolost-timeaccidentrecordoverthelastthreeyears.forLatinAmericathesepercentagewere32%and7%respectively.

Overall,safetyperformanceofSmurfitKappaemployeesimprovedbymorethan10%regardingthenumberofaccidentsin2012comparedto2011,andthenumberoflostworkingdaysduetoaccidentsdecreasedbynearly20%.Alostworkingdayiscountedwhenanemployeemissesthenextregularworkingdayorshift.Inthegraphsonpage48severityandfrequencyratesaresplitbyregionandbyactivityforourownemployees.ConvertingalsoincludesSmurfitKappaNewsPress,EdCoandDLRSSecurityConcepts.

State of the art forklift truck designed and equipped to improve Health and Safety at the workplace.


Trucks lift Health and Safety level at the workplace

LeadingforklifttruckproducersHysterandLindebothhavealongpartnershiphistorywithSmurfitKappa. Theirstateoftheartforklifttrucksarenotonlyverydependableperformancemachines,thevehiclesarealsodesignedandequippedtoimproveHealthandSafetyattheworkplace.

RichardRoot,majoraccountsmanagerofHyster:“Duringthemostrecenttenderingprocess,SmurfitKappahasbeenparticularlyconscientiousintheconsiderationofmaterialshandlingequipmentandpro-activeinthestandardandoptionalfeaturesavailable.firstweidentifiedtheminimumliftcapacityandheightrequirements.Thenweformulatedthestandardisedfeaturesoneachmachineincludingareversealarm, aflashingbeacon,atractionspeedlimiter,passwordprotectedoperatoraccessandinternalmirrorstohelpreduceblindspots.Plantswerealsogiventhechoicetoaddoptionalfeaturestotailortheforklifttruckstotheirownspecificworkenvironment.”

InternationalkeyaccountmanagerRobertKovacsofLinde:“SmurfitKapparanksamongstthecompaniesintheindustrywiththemostprofessionalapproachwithregardtosafetyefforts.TheindustrywouldbebetteroffifSmurfitKappa’sstandardisedlistofminimalsafetyspecificationswascommonpractise.Unfortunately,weseldomreceivesuchadetailedsafetylistwhenmanagingsimilarinternationaltenders.Thelistcoversmostsafetyissues.WedokeepinclosecontactwithSmurfitKappa toinformthecompanywhennewsafetyfeaturesandtechnologiesbecomeavailabletoconstantlyhelpimproveSmurfitKappa’ssafetystandards.”



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Employees from Smurfit Kappa Orange County’s Tijuana plant undergoing training at the Health and Safety Day.

Employees at the Smurfit Kappa Medellín corrugated plant in Colombia reviewing safety procedures.


Annual Health and Safety Day

InApril2012,aSafetyDaywasorganisedinallourEuropeanplants.AnaddressbyTonySmurfit,theGroup’sChiefOperatingOfficer,highlightingtheimportanceofhealthandsafetyforemployees,wasscreenedinalloperations.Duringthedaymanyactivitieswereorganisedforandwithemployees,andallseniorexecutivesattendedatoperatingplantsontheSafetyDay.

TheSafetyDaywasaresoundingsuccess,drawingontheactiveparticipationandintenseinvolvementofmanagementandinteractionwithouremployees,andinmanycaseswiththeirfamilies.

AHealthandSafetyDaywillnowbeorganisedeveryyearinallourplantsinEuropeandtheAmericas.fortheHealthandSafetyDayin2013,avideowasproducedwiththehelpofthreeemployeeswhohadsufferedanaccidentatwork.Theysharedstoriesfromtheiraccidentandwhattheyhavelearnedfromtheseexperiences.Thevideowasshowntoallemployeesinordertohighlight theimportanceofalwaysputtingsafetyfirst.

Bill Barden (l.) - Get Set Training, explaining safe moving and handling with Chris Canavan - Smurfit Kappa Lurgan, Northern Ireland.

Tony Smurfit (front row left) with his colleagues attending the Health and Safety Day at Smurfit Kappa Lübeck, Germany.


Venezuela: Smurfit kappa Venezuela takes Customer Service to the next level

Workingtogetherwithacustomerisnotonlyacommercialendeavour.Itisaboutbuildingamutuallybeneficialrelationshipthatgoesmuchfurtherthanmarketperformance.forinstancethemilldivisionofSmurfitKappaVenezuelahasbeenverysuccessfulinhelpingitscustomersimprovetheirownHealthandSafetysituation.

feedbackofSouthAmericancustomershasbeenexcellent.Theyvaluethetime,effortandexpertiseSmurfitKappaVenezueladedicatestopromotingsafetyandeducation. Theprogrammehasbeenunderwayforalmostthreeyears andhasbecomeamonthlyroutine.Safetyisanimportant issuewithinSmurfitKappaVenezuelawhichisdemonstratedbytheregularsafetychecksattheworkplace,monthlysafetythemes,workshopsandtransportationsafetyevaluations. TheSalesandCustomerServiceDepartmenthasextended theSmurfitKappaphilosophyonsafetytoitscustomersbyofferingtrainingandexchangingbestpractices.Besidesdevelopingcloserrelationshipswithcustomers,themainobjectiveofthisinitiativeistofurtherimprovesafeworkingconditionsforSmurfitKappaVenezuela’scustomers.

Colombia: Smurfit kappa Health day in Colombia

OurmainproductionfacilityinColombiaisbasedontheoutskirtsofCaliinasmalltowncalledYumbo.On14July2012,themillwelcomed570peoplewhoparticipatedin theSmurfitKappaHealthDay.Thethemeoftheeventwas:‘Cartónatodocorazón’or‘Cartonwithallyourheart’.

ThishealthawarenessdaywasorganisedbyemployeesfromtheMedicalServicesdepartmentwhichhadvaluablesupportfromotherareassuchasHR,MarketingandCommunications,andtheforestryDivision.Theobjectiveofthiseventwastocreateawarenessamongemployeesandtheirfamiliesabouttheimportanceofhealthcareandwell-being.Inordertolearnhowtopromoteandliveahealthylifestyle,adults andchildrenparticipatedinphysicalactivitiesandsports.familiesenjoyedgames,theatrepresentationsandchallengingphysicalexercises.AttheHealthfair,stands werehostedbyinstitutionsandcompaniesproviding relevantinformationwhileallofthosewhoparticipatedhadtheopportunitytobuyproductsandcollectbrochuresandmanualsrelatedtohealth,physicalactivityandwellbeing.

Italy: Smurfit kappa italy helps employees to create safer homes

SafetyBridgeisthenameofauniqueconceptaimedatreducingrisksinthehomeenvironmentofemployees.WiththesupportofanItalianconsultantcompany,SmurfitKappaItalyhasadaptedandpromotedsuchariskanalysistoolsuccessfully.

Theideaissimpleandeffective:whynotusetheexpertiseSmurfitKappaItalyhasgainedprofessionallytohelpemployeesreducehazardoussituationsathome?Inshort,riskpreventionbytransferofknowledgeandtools.SafetyBridgestimulatesemployeestoassessthesafetyleveloftheirhomesbymakinguseofaquestionnaire.Employeesaretrainedtomakeaproperassessmentandreceivepersonalisedfeedback.BycreatingalinkbetweensafetyathomeandsafetyatworkSmurfitKappaItalywantstohelpemployeestorealisesaferhomeenvironmentsandatthesametimeimprovetheirsafetyawarenessandperceptionofrisksatwork.

Creating awareness among employees and their families about the importance of health care and well-being at the Smurfit Kappa Health Day held in Yumbo, Colombia.

Safety Bridge is the name of a unique concept aimed at reducing risks in the home environment of employees organised by Smurfit Kappa in Italy.

National and local customers value the time, effort and expertise that Smurfit Kappa in Venezuela dedicates to promote safety and education.


Germany: Thinking out of the headbox improves safety

Cleaningtherazor-sharp,fivemetreswide,headboxlamellaofapapermachinewithahighpressurecleanerisnotwithoutriskasitislocatedinatight,hotandwetenvironment,thusincreasingtherisk ofinjuries.Afteranincidentwhereoneoftheircolleaguesincurredseriouscuts,HelmutLerche andKlausSchultzfromSmurfitKappaZülpich tookituponthemselvestopreventthisfromhappeningagain.

Thetwoemployeesmanagedtodevelopanaward-winningspecialtoolwhichcanbemountedattheendofahighpressurehose.Thisdeviceenablesoperatorstocleantheareaofthelamellainasafeway.Specialrollslockandguidethedevicealongthelamellawhilethewaterjetispositionedforoptimalcleaning.Theinventionimprovessafetyandensuresmachineefficiencyandproductqualitybyoptimisingthecleanlinessofthiscriticalpartof themachine.

Thisprojectearnedthe2012SpecialAwardofthe“GermanEmployers”liabilityinsuranceassociationforthesectorsof‘rawmaterialsandthechemicalindustry’.

Mexico: Safety takes centre stage in Mexico

Tocelebratefathers’Day,employeesandfamiliesof allthedifferentSmurfitKappaoperationsbasedin theMexicoCityMetropolitanareawereinvitedto atheatricalperformanceoftheplay‘PeterPan’. Asarecognition,prioritywasgiventoemployeeswith arecordof‘ZeroAccidents’duringtheiremploymentwithSmurfitKappa,tothoseemployeeswithanexemplarysickleaverecordandalsotopersonnel whohadcontributedwiththelargestnumberof creativeparticipationproposals.

fourperformanceswerebookedbySmurfitKappaMexicotoaccommodateallthefamilies.Theywerewelcomedbyhighlightingtheimportanceofsafetyandgivingrecognitiontothesafeparents.Thechildrenwereofferedtheopportunitytohavetheirfacespaintedwiththeirfavouriteanimalorcharacter,whilethefamilyenjoyedlunch.Attheendoftheplay,actorsandfamiliessangtheMañanitas,whichisacelebratorysong,tocelebratethesafeparents.

Helmut Lerche and Klaus Schultz - Smurfit Kappa Zülpich developed an award-winning special tool which can be mounted at the end of a high pressure hose. Smurfit Kappa employees and their families celebrating

Fathers’ Day in the Mexico City Metropolitan area with a performance of Peter Pan. Recognition was given to employees a) with a record of ‘Zero Accidents’, or b) with an exemplary sick leave record and c) also to employees with the largest number of creative participation proposals.

Spain: Health and Safety is a way of life in Andalucía

WhyisHealthandSafetyconductoftenrestrictedonlytotheworkplace?TheAndalucianSmurfitKappaplantsaskedthemselvesthisquestionandtogethertheycameupwithananswer.Theiropinion:HealthandSafetyshouldbeanintegralpartofthedailylifeofeveryoneresultinginbetterqualityoflifeforfamilies.

Toaccomplishthistheplantsinitiatedanextensiveawarenessprogrammeconsistingofpromotionalmedia,trainingandawarenessactivities,guidedtours,contestsforkidsandeducationaboutpersonalprotectionequipment.Allaspectswerelinkedtohomeriskprevention,safetyatschoolorpreventivemeasuresintheworkplace.Theproject,originallystartedbytheMengíbarMill,hasbeensuccessfullyextendedtotherest oftheAndalucianplantsinHuelva,CórdobaandAlmería.TheinitiativehasbeenrecognisedbytheAndalucianGovernmentanditspromotionalposterreceivedaninternationalaward.

Smurfit Kappa plants in Andalucía, Spain initiated an extensive programme to raise awareness on health and safety at home. The poster received an international award.



2. SOCiAl CiTizENSHiP

Guiding principlesWearecommittedtomanagingrelationshipswithfellowemployees,businesspartnersandhostcommunitiesinasociallyresponsiblemanner.

Wecomplywiththeprinciplesexpressedinthe UnitedNationsDeclarationofHumanRightsandthefundamentalPrinciplesandRightsatWorkdeveloped bytheInternationalLabourOrganisationinallofthecountriesinwhichwehaveapresence.

InkeepingwiththisDeclarationandthesePrinciples:

nWeprohibitdiscriminationonthegroundsofrace,colour,gender,sexualorientation,age,religion,nationalorigin,disabilityorotherlegallyprotectedstatusinthecountriesinwhichweconductbusiness.Noissuesofdiscriminationinanyofthesecategorieswereidentifiedin2012.

nWesupportfreedomofassociation.Ouremployeeshavetherighttobecome(andremain)amemberofaTradeUnion,havetheirrepresentativesnegotiateandbargainontheirbehalfandassistthemingrievanceanddisciplinarymatters.

TheCollectiveAgreementscurrentlyapplyinginsome90%oftheGroup’ssitesaretheresultofeitherlocaland/ornationalnegotiationsinthecountriesconcernedinbothEuropeandLatinAmerica.

Wearenotawareofeithertheassociationorbargainingrightsofanyindividualorgroup(s)ofemployeesbeingdeniedtothemduringthecourse of2012.

nWeprohibitchildlabour.Wewillnotemploy,inanycapacity,anyonewhohasnoteitherreachedthemandatedschoolleavingageortheminimumagesetforemploymentinanycountryinwhichweoperate.Noissuesunderthisheadingwereidentifiedin2012.

nWetreatemployeeshumanely.Wedonotapproveofortolerateforcedlabourorphysicalabuse.Wedonottolerateanyotherformofabusivebehaviour,whetheritoriginatesfromwithinourbusiness(andisdirectedinternallyorexternally)oritssourceisanindividual(ororganisation)withwhom(orwithwhich)wehaveabusinessrelationship.Noissuesundereitherheadingwereidentifiedin2012.

nWecompensatefairlyandreviewwageandsalarylevelsatregularintervals.Whereappropriateweuseexpertmethodologiesandinputfromthecurrentjobholder,solelytakingthefunctionunderreviewintoaccount.Weensurethatpayratesineachcountryinwhichweoperatematchorexceedtheminimumstandardsetbyitsgovernmentorlegislature.

nWecelebratethewidevarietyofskills,abilities,backgrounds,experiencesandperspectivesrepresentedbyeveryemployeeinourGroup.Werespectemployeecontributions.Weoperateasameritocracy.Wepromoteonthebasisofsuitability,rewardfairly,encouragepersonalandprofessionaldevelopmentandpromoteeffectivecommunicationateverylevelofthebusiness.

Inthecontextoftheabove,weselect,andpromotepeople,solelyonthebasisofsuitabilityforthepositioninquestion.

Compensation and BenefitsTheGroupdoesnotdiscriminatebetweenmenandwomenintermsofsalary,benefitsoranyotherconsideration.TheGroupappliesthepolicyof‘samejob,samepay’.ThereisnoformalsystematGrouplevelthatallowsustomeasurethepreciseratioforremunerationbygender.

Whilethebasicsalaryofanindividualmanagermaybedifferentfromthatofacolleagueinanidenticalorsimilarrole,thedifferencewillgenerallybeareflectionofthedifferenceinexperience,sizeofthejob,performance,etc.andnotasaresultofnationalityoranyothersuchreason.

Incommonwithmanylargebusinesses,SmurfitKappaprovidesarangeofemployeebenefits.Some,suchas,maternityandpaternityleave,areprovidedunderthelegislationofthecountryinquestion.

Otheremployeebenefits,suchasPensionPlansand LifeInsurance,formanintegralpartoftheemployee’sremunerationpackageprovidedbytheGroupinvariouscountries.

Employee demographics and TurnoverAttheendof2012,theGrouphadsome41,000employees.Thisfigureincludesbothourownemployeesaswellascontractedlabour,andalsoincludes2,900employeesinSKOCthatwasacquiredin2012.fortheremainderofthissectiontheSKOCemployeesareexcludedasthatcompanywasacquiredonlyinDecember2012.


Ascanbeseeninthegraphsabove,some43%ofouremployeesare40yearsofageorunder,withalmostathirdofthetotalbetweentheageof41and50years.

Asshownabove,approximately55%ofouremployeeshavebeenwithusfor11yearsormore.Morethan10%havebeenwithSmurfitKappaforover30years.Justunder70%ofourworkforceisinvolvedinproductionandmanufacturingactivitiescategorisedasdirectlabour,withthebalanceoftheemployeesengagedinmanagementactivitiesandinactivitiessuchassalesandmarketing,finance,humanresourcesandprocurement:allcategorisedasindirectlabouractivities.Approximately5%ofouremployeesareengagedunderatemporarycontract.

Almost82%ofourpeoplewereemployedintencountries(Germany,france,Mexico,Venezuela,Netherlands,UnitedKingdom,Colombia,Spain,Italy andSweden),withtheremaining18%oftheworkforceemployedintheremaining22countrieswerewehave aproductionand/orasalesandmarketingpresence. ThisdistributiongenerallyisinlinewithSmurfitKappa’sdistributionofactivities.

During2012,some17nationalitieswererepresentedatthemostseniorlevelsintheorganisation.Althoughwedonothaveapolicyofselectinglocalresidentsandit isourpolicytoselectthebestpersonavailableforanyposition,inpractice,byfarthegreaterproportionofsenioroperationalpositionsareheldbylocalmanagers(samenationalityasthecountrywheretheoperationislocated).Ingeneral,thecompositionoftheGroup’s

workforcetypicallyreflectslocalethnicdiversity,therebyenhancingthebondwithlocalcommunities.

In2012,16%ofallSmurfitKappaemployeeswerefemaleand84%weremale–seegraphabove.Ofallmanagementfunctions,16%areperformedbywomenversus84%bymen.Oftheindirectpositionsinareassuchassalesandmarketing,finance,humanresources,procurementandadministration,almost40%areoccupiedbywomen.

SmurfitKappa’spolicyistoincreasethelevelofparticipationofwomeninmanagementrolesinthecompany.Inthatcontextwearereviewingtheareasandroleswheretheretentionlevelandfurtheradvancementofwomenhasthegreatestpotentialforsuccess.

Inrelationtoreturntoworkandretentionratesafterparentalleavewedonotkeepcentralrecords.In2012,weanalysedthesituationintwocountries(PolandandSweden)andthestatisticsfortheyear2012areshownforillustrativepurposesinthetablebelow.

Poland

1. onparentalleave:10 (ofwhich1man)

2. returntoworkafterparentalleaveduring2012:10(retentionrate100%)

Sweden

1. onparentalleave13 (ofwhich5men)

2. returntoworkafterparentalleaveduring2012:8,ofwhich4men(retentionrate62%)

Female 16%60+ yrs 3% <20 yrs 1%

21-30 yrs 16%

30+ yrs10% <5 yrs

24%

5-10 yrs22%

11-20 yrs25%

21-30 yrs19%

31-40 yrs 26%

51-60 yrs 22%

41-50 yrs 32%

Male 84%

Female 16%

Male 84%

Total Employees by Age 2012

Female 16%60+ yrs 3% <20 yrs 1%

21-30 yrs 16%

30+ yrs10% <5 yrs

24%

5-10 yrs22%

11-20 yrs25%

21-30 yrs19%

31-40 yrs 26%

51-60 yrs 22%

41-50 yrs 32%

Male 84%

Female 16%

Male 84%

length of Service Total Employees 2012

Top 10 Countries Headcount 2012

0

1,000

2,000

3,000

4,000

5,000

6,000

SwedenItalySpainColombiaUnitedKingdom

NetherlandsVenezuelaMexicoFranceGermany

Female 16%60+ yrs 3% <20 yrs 1%

21-30 yrs 16%

30+ yrs10% <5 yrs

24%

5-10 yrs22%

11-20 yrs25%

21-30 yrs19%

31-40 yrs 26%

51-60 yrs 22%

41-50 yrs 32%

Male 84%

Female 16%

Male 84%

Management Gender 2012

Female 16%60+ yrs 3% <20 yrs 1%

21-30 yrs 16%

30+ yrs10% <5 yrs

24%

5-10 yrs22%

11-20 yrs25%

21-30 yrs19%

31-40 yrs 26%

51-60 yrs 22%

41-50 yrs 32%

Male 84%

Female 16%

Male 84%

Total Employee Gender 2012



Attheendof2012,thetotalpercentageofemployeeturnoverintheorganisationhadincreasedfrom4.4%in2011to4.6%in2012.Retirementsaswellasthepursuitofothercareersorinterestswerethereasonsforthedepartureofmorethanhalfoftheemployeesin2012,whilerationalisationandredundanciesaccountedfor afurtheroneseventhofthedeparturesin2012.Therewere2,321newentrantstotheGroupduring2012,ofwhich63%inEuropeand37%intheAmericas.

Employee Training and developmentOurpeoplearethedrivingforcebehindourbusinessandSmurfitKappaiscommittedtothecontinuoustraininganddevelopmentofemployeesseekingtoachievetheirfullpotential.Apartfromourcommitmenttofacilitatethepersonaldevelopmentofouremployees,traininganddevelopmentneedstobeseentofurtherraisethestandardsofbusinessperformanceneededtocompeteasacompanyinthemarketsinwhichweoperate.Ourtraininganddevelopmentprogrammesfocusonareassuchasknowledgeofbestpractice,skilltransfer,andhealthandsafetycompliance.Theseprogrammesarecomplementedbyarangeofeffortsaimedensuringthatourbusinessethicsandstandardsarefullyunderstoodbyallemployeesandarereflectedintheirday-to-dayconduct.Theultimateaimofourtraininganddevelopmentprogrammesistohaveaworkforcethatis:

nPerformingwell

nHighlycommitted

nWorkingasateam

nConstantlylearning

nPromotedbasedonmerit.

In2012,theaveragenumberoftraininghours(includingtheentirerangeoflearninganddevelopmentinitiatives)was20hoursperemployee.

During2012,therewerenumeroustraininganddevelopmentactivities,bothcentrallyandlocally.Thetotaldirectexpenditureontraininganddevelopmentduringtheyearamountedtoapproximately€2.5million,withfurthersignificantindirectcosts.

Onacentrallevel,theAdvancedManagementDevelopment(AMD)Programmeisanexampleofadevelopmentactivitywhichhasevolvedovermore thanadecadethroughouttheGroupinEuropeand LatinAmericainconjunctionwiththeUCDSmurfitBusinessSchool.

Male Female

Number

0

50

100

150

200

ColombiaVenezuelaSwedenItalyNetherlandsSpainMexicoGermanyUnitedKingdom

France

Management Gender: Top 10 Countries 2012

Male Female

Number

0

1,000

2,000

3,000

4,000

5,000

SwedenItalySpainColombiaUnitedKingdom

NetherlandsVenezuelaMexicoFranceGermany

Total Employee Gender: Top 10 Countries 2012


In2012,anewprogrammehasbeendevelopedand wasaddedtothecentralgroupprogrammeportfolio. TheGeneralandMillManager(GM)Programmeisthe firstofitskindinthecompanyandaimstoprovideparticipantswithbothinternalandexternalperspectivesonleadershipandprovidesinsightintotheircurrentapproach.TheprogrammeprovidesthenewGM’swiththevaluableopportunitytolearnnotjustfromtheseniormanagementteamandsubjectmatterexperts,butalsofromeachother.

Inadditiontotheseprogrammes,theworkingrelationshipwithtwoleadingEuropeanBusinessSchools(LondonBusinessSchoolandINSEAD)hasbeenfurtherstrengthened,providingexecutiveeducationforourSeniorExecutivestocontinuetheirlearninganddevelopment.

AnotherprogrammemanagedfromtheGroup’sheadoffice-andonewhichhasgainedgreatmomentumwithover350participantssinceitsintroductionin2007-istheEnglishImmersionProgramme.Nowanestablishedeventinourtraininganddevelopmentcalendar,itisfullyintegratedwithlocallanguageactivities,beite-learningorclassroom-basedlearning.ThiscustomisedprogrammebringstogetherindividualsfromvariousfunctionstoboosttheirconfidenceinusingbusinessEnglishintheirday-to-daywork.Duringthecourseof2012,afurther65participantswerecateredfor.

During2012,oneofourEuropeandivisionsconductedonaEuropeanlevel,a“360Degreefeedback”appraisalsystemandmadeuseofprofessionalexternalcoachingsupporttoprovidethoseexecutivesconcernedwithagreaterknowledgeoftheirstrengthsandtohighlightareasofdevelopment.

TheJuniorManagementTeamProgrammeconceptdevelopedinourpapermillinNettingsdorfer,Austria,hasbeensuccessfullytransferredandappliedtootherpartsofthebusiness,e.g.inourpapermillinPiteå,Sweden.Thisprogrammeprovidesanenvironmentforjuniormanagerstoexplorenewapproaches.

InourRoermondmillintheNetherlands,ouron-goingprogrammecalled“ProjectPaperTrain”,enablesexperiencedemployeestopassontheirknowledgetocolleagueswithlessexperience.Thisinitiativeisnowwellestablishedensuringthatvaluedknowledge/expertiseisnotlostovertime.

TheorganisationcurrentlyundertakesanannualPerformanceandDevelopmentReviewof90%ofitsmanagers.Typically,theseareconductedonaone-to-onebasisinvolvingtheindividualconcernedandhis/herimmediatemanager.Performancereviewsarealsoconductedwithnon-managerialemployees,currentlyapplyingtosome50%ofthiscategoryofpersonnel.

Carolina Atehortua from Smurfit Kappa in Colombia attending an internal training course.




German Sales training programme: Sales Training Programme welcomes 1,100th participant

Boris Maschmann, CEOSmurfitKappaGermany

“Wefirstintroduced oursalestrainingprogrammein2007.Theideafortheprogrammewastoliftthegenerallevelofknow-how.Ourcompanystimulatesthepersonaldevelopmentofemployees.Aspotentialsneedsupporttodevelop,weoffertrainingprogrammesinmanydifferentareasofexpertise.Uptillnow wehavetrainedalmost1,100employees.Thetargetwastoestablish a“bestinclass”rateinoursalesactivitiestoensureaveryhighqualitylevelinourcustomerrelationship.Tostayontopwewillcontinuouslydevelopexistingandadditionaltrainingstocopewiththechangingdemandsofourenvironment–company,customersandemployees.“

Julia Kullmann, Keyaccountmanager SmurfitKappaSouthwest

“Iparticipatedintheprogrammeduringmytraineeshipandtookpartinallthesalesmodules.Iquicklygot toknowthecorporatephilosophy,learnedthebusinessfundamentalsandhowtodealwithcustomersandpeopleingeneral.Theseminarleaderscreatedarelaxedbutefficientatmospherewhichstimulatedthelearningexperience.Games wereimplemented intheprogrammein aninterestingandeducationalway.Ithinkitisveryimportanttogettrainedregularly andSmurfitKappafacilitatesthatvery well.Thevarietyof theprogrammeisremarkable.Ialreadyfoundsomeseminars Iaminterestedinforthefuture.”

Monika Schaper, Salesmanager SmurfitKappaHerzbergerWellpappe

“Between2003and2010Iattendedtrainingprogrammesthatcoveredawiderange oftopicslikehealthandsafety,andsalesandfinance.Iexperienced averyeffectivelearningmethodinapleasantatmosphere.Weparticipatedinvariousactivitiesandreadmanycasestudies.Wecompletednumerousquizzeswiththesupportofourcreativeandprofessionaltrainers.IntheendIfeelIgotalotofhelpfulsuggestionsformydailybusiness aswellasnewinsightsintomyrelationshipwithourcustomers andindealingwith ourownsalesteam. Myexpectationswereexceeded!Thistrainingisveryimportantforcontinuousimprovement.“

Torsten Antosik, Accountmanager SmurfitKappaBrühl

“Myexpectationwas toextendmyhorizon. Inthefourmodules IparticipatedinIexperiencedawellthoughtouttrainingset-up.Allsubjectsdiscussedwereclearandeasytoremember.Thetrainingprogrammeswerereallyhelpfulinmydailywork.Iusemanysmallpointerseachdayandstillremembermostofthetrainingcontent.Networkingwiththecolleaguesfromourotherplantsisanothergreatadvantage.Duringeachtrainingmoduleyouusuallyexchangeyourownprofessionalexperienceswiththeotherparticipants.In myopinionthetrainingpromotesworkingin ateamaswellassupportingthepersonalityofeachindividualparticipant.“


GraduatesGraduateTraineeProgrammeswithinEuropeandLatinAmericacontinuetoprovideopportunitiesfortraineesjoiningtheGrouponcompletingtheiruniversityprogrammestokick-starttheircareers.Overthepastyearstheintakehasincreasedgraduallyandamounted toatotalof139in2012.

ManywhohavejoinedthecompanyasGraduateTraineeshavesuccessfullyprogressedtheircareerwithinthecompany.Wehaveseenthegreatcontributionthatgraduatesandstudentscanmaketoourbusiness,addingvalueandmaximisingtheirpotential,whilehelpingustobuildforthefuture.

Retired employeesOurretireeshaveaspecialrelationshipwithSmurfitKappawhichisgratefulfortheircontributiontoitsgrowthandsuccessovermanyyears.Todaythereareapproximately13,000pensionersfromSmurfitKappaandthereareavarietyofdifferentassociationsindifferentcountriesthatmanageahostofsocialactivitieswhichgreatlyhelptomaintainthebondsthepensionersenjoyedasworkingcolleagues.

Whilstmostoftheactivitiesaremanagedbythepensionerassociationsthemselves,thereisalsoon-goingGroupsupportatlocallevel.

internal communicationWevalueregular,timelyandefficientcommunicationwithouremployeesandtheirrepresentatives,conductedinanopenandconstructivemanner,toexchangeviewsonallmattersaffectingourbusiness.TopicsincludeHealthandSafety,workingconditions,termsandconditionsofemployment,theperformanceofthebusiness,thebusinessoutlook,investmentdecisions andacquisitionsanddisposals.

WearecommittedtoprovidingouremployeeswithregularupdatesontheoverallperformanceofSmurfitKappaandtheindividualbusinessunits,andonanyissuesthatmaypotentiallyhaveanimpactonthem. Indoingso,wemakeuseofappropriatemediawhichincludedepartmentalandfunctionmeetings,sitegeneralbriefingsandmanagement/employeerepresentativemeetingsatlocal,nationalandregionallevels.TheinternetandSmurfitKappa’sinternalintranetarealsousedextensively.

Mostofouroperationshaveinternalcommunicationsvianewsletters,announcementsandlocalintranetmessages,thesemediapromoteaconstantflowofnewsandemployeeinterchange.

European works CouncilSmurfitKapparecognisestherightofemployeestofreelyassociateandallSmurfitKappaemployeesarefreetojointradesunions.Inmanycountries,SmurfitKappaconductsformalemployeeconsultationprocesseswiththelocalWorksCouncils.

ByfarthelargestrepresentativegroupinSmurfitKappaEuropeistheEuropeanWorksCouncil(EWC),whichrepresentsabout80%ofouremployeesfromthe 21countriesinEuropewherewehaveoperations.

TheAgreement,renewedin2011,governingthefunctioning,rightsanddutiesoftheEWC,willremain inplacefortwomoreyearsuntil2015.

During2012andasperourAgreement,wehadour tworegularEWCforumsandthreeSelectCommitteemeetings.

TheEWCconsistsof30members,representingallemployees.Theprocedureforthenominationandselection/electionofitsmembersisinaccordancewithnationalregulationsandpracticeineachofthecountriesinvolved.AlthoughtheEWCisnotanegotiatingforum,itdoescomplementexistinglocalandnationalstructureswhereinformationdisseminationandconsultationoccurs.

Typically,thetopicscoveredatsuchmeetingsinclude:

nTheGroup’sfinancialstatus.

nProspectivedevelopments.

nRelocation,productioncurtailmentsorbusinessclosuresinanycountrywheretherearetransnationalimplications.

nEnvironmentalprotection.

nEmploymentopportunities.

nHealthandSafety.

Whenqueriesarisefromouremployeesand/ortheirrepresentativesormeetingsarerequested,ourpolicy istorespondinatimelymanner.

Whenadecisionistakentointroducechange,employeeconsultationtakesplacepromptly.Duringthecourseofsuchdiscussions,theimpactoftheproposedchanges,togetherwiththeimplementationplans,arediscussedwithemployeesandtheirrepresentatives.

Theoutcome,reflectinglocaland/ornationalcustomandpracticeorlegislation,willresultinoneormoreofthefollowing:severancepay,careercounselling,jobsearchworkshops,financialadvice(includingpension)andearlyretirementwhereappropriate.

Theperiodsofnotice,measuredintermsofthetimebetweentheinitialcommunicationstotheemployeesconcernedandtheintroductionofthechanges,rangefrom6weeksto24weeks.

Acquisition and procurement practicesAkeyaspectofduediligenceinanyacquisitionprocessinvolvingSmurfitKappaisanexaminationofthetargetorganisation’shumanresourcepoliciesandpractices,bothintermsoftheircompliancewithlocal,nationalandinternationallawsandintheirday-to-dayinterpretationandapplicationintheorganisation.



Intheeventofanypotentiallyseriousissuearisingasaresult,suchaschildlabour,theacquisitionprocesswillbereviewedastotheappropriatenessofcontinuing withit.

Thereweretwoacquisitionsduringthecourseof2012andnosuchissuesarose.

SmurfitKappaiscommittedtotheprinciplesreflected inbothitsCodeofBusinessConductanditsSustainableSourcingPolicyStatementinallofitsdealingswithitssuppliersandcontractors.

InkeepingwiththeSustainableSourcingPolicyStatement,SmurfitKappaaimstoworkwithsupplierswhoshareitsdeclaredvaluesofgoodsocialcitizenshipinparticularinsuchareasascompliancewiththerelevantregulations,theprovisionofhealthyandsafeworkenvironmentsanddemonstrableadherencetohumanrightsinallitsaspects.

OfequalsignificancetoSmurfitKappaisthecommitmentofthesesamesuppliersandcontractorstosimilarsociallyresponsiblebehaviourintheconductoftheirownbusinesses.

StrategicsuppliersarebeingencouragedtojointheUNGlobalCompactinitiativeandtheSocialandEthicalDataExchange.Theyarealsobeingencouragedtodiscloserelevantdatainthisregard,eitherdirectlytoSmurfitKappaorthrougharecognisedorganisation.

Since2010,weauditkeysuppliersinrespectofanumberofindicatorsincludinghumanrights.

InEurope,aspartofarollingprogramme,justover80%ofoursignificantsuppliershavesofarbeenaudited,includingscreeningforhumanrights.Attheendof2011,16outofatotalof55strategicsuppliershadbeenaudited.During2012,30morestrategicsupplierswereaudited.Theremainingstrategicsuppliersareplannedtobeauditedin2013.Typically,eachauditresultsinalistofactionpointsforthesupplierofwhichtheresult isthenfurtherdiscussedwithourauditteamsafter sixmonths.

SmurfitKappa’sSustainableSourcingPolicyandSocialCitizenshipPolicyStatements,togetherwiththeCodeofBusinessConduct,canbedownloadedfromtheSmurfitKappawebsite.

Group AwardsThroughourSmurfitKappaAwardscompetitionsinbothEuropeandtheAmericasregions,westrivetostimulatetheambitionofourpeopleandourbusinessunitstoalwaysdobetter.Thevariousawardcompetitionsserveseveralpurposes.Thecoreobjectiveistoencourage,recogniseandrewardentrepreneurship,innovationandsuperiorperformance,whetheritisintheareaof

operations,innovation,safetyorsustainability.Theawardsarevisibletotheorganisation’sentireworkforceandthishelpsinsharingtheobjectivesoftheorganisation,creatinganaspirationalclimateandenforcingitspriorities.

InEurope,wehaveinternalcompetitionsforOverallPlantoftheYear,HealthandSafetyAwards,InnovationAwardsandSustainabilityAwards,eachwiththeirownobjectivesandpurposes.for2012,ourLitholaminatedprintedpackagingsolutionsoperationLithoPacinNybroinSwedenwasawardedOverallPlantoftheYearforitsexcellentandabovemarketperformance,vision,desiretoinnovateanditscommitmenttooutperformatthehighendoftheprintingmarket.

InHealthandSafety,theAwardsforExcellenceinSafetywereawardedtoourrecycledpapermillinMengibarinSpain,ourcorrugatedoperationinSoestintheNetherlandsandinWareninGermany.TheseoperationsachievedamultiyearrecordofworkingwithoutanylosttimeinjuriesoraccidentsandshowedtheircommitmenttocleanandtidyhousekeepingwhilehavingalocalmanagementteamthatdemonstratedcommitmenttoHealthandSafety.TheAwardforExcellenceinSafetyImprovementwasawardedtoourrecycledpapermill SSKinBirminghamandourcorrugatedoperationinDiss,bothintheUK,fortheirexcellentsafetyrecordandtheirrespectivesafetyimprovementprogrammes.

TheInnovationAwardsandtheSustainabilityAwards areEuropeancompetitionsspanningaperiodofapproximately18months.ThenextAwardswillbe presentedinSeptember2013.

IntheAmericasthereareinternalcompetitionsfortheAwardPlantoftheYearbyregion/countryandfortheAmericasasawhole.OurfoldingCartonoperationinMexicowasnamedOverallPlantoftheYearintheAmericasforitsexcellentcommercialandoperationalperformanceoveraperiodof7years.InArgentinaandChile,ourcorrugatedplantinChilewasawardedforitsresilienceaftertheearthquakein2010anditsoperationalrecoverysince.InColombia,ourcorrugatedoperationinBarranquillawasawardedforitsoperationalimprovementsanditsexcellentsafetyrecordofzeroaccidentsin2012.InMexico,ourGuanajuatocorrugatedoperationwasawardedforgoodoperationalperformanceandrecognitionsfromboththeMexicangovernmentfortheirsocialresponsibilityprogramaswellasfromanumberofimportantcustomers.InVenezuela,ourcorrugatedoperationinCaracaswasawardedforitssustainedgoodoperationalperformanceanditsgoodrelationswithitsemployeesdespitechallenginglocaleconomic,socialandpoliticalconditions.


3. OuR iNVOlVEMENT iN THE COMMuNiTyCommunityinvolvementisakeycorporateresponsibilityalreadypractisedinmanylocationswherewehaveoperations.

Ourobjectiveistocontributepositivelytotheeconomicandsocialdevelopmentofthecommunitiesofourhostcountrieswhereweareprivilegedtooperate.Whileourbiggestcontributiontoourcommunitiesisinthejobswecreatethroughourinvestments,wearealsocommittedtorespondtothecommunities’socialneeds.Westrivetobeanintegralpartofthecommunitieswherewearelocated,bysupportingactivitiesandcommunitysupportprogrammesfocusingonareassuchaseducationandhealthprogrammesandareasofourspecificexpertise.

Wedothisintwofundamentalways,throughmakingfinancialcontributionsand/orbyvolunteering.

Inthecourseofourbusinesstransactions,wealsotakeintoaccounttheconcernsofthewidercommunity,includinginternational,nationalandlocalinterests.Eachplantmanagerisexpectedtorepresentthecompanyaspartofthelocalcommunityandplayapositivepartinitsdevelopment.

Itfallstoeachplantmanagertomaintainanactivedialoguewiththecommunitieslivingincloseproximitytohis/herfacility,respondinthefirstinstancetoanycomplaintsorissuesofconcernandinitiateappropriateremedialactionwherenecessaryandpossible.

Our COO, Tony Smurfit (front middle standing),

amid employees celebrating 150 years of paper making

at the Smurfit Kappa SSK mill in Birmingham,

United Kingdom. The SSK mill today plays a vital role in providing local

employment.

United Kingdom: 150 years of paper making in Birmingham

foundedbackin1862bythreeVictorianentrepreneurs,theSmurfitKappaSSKpapermilltodayplaysavitalroleinprovidinglocalemploymentaswellasreducingtheBirmingham’scarbonfootprint.Almost40,000tonnesofpaperandcardboard(recycledbyBirmingham’sresidentsintheirBirminghamCityCouncilkerbsidecollectionboxesorinSmurfitKappaRecyclingpaperbanks)istakentothepapermilleveryyearwhichisthenusedbythemillasarawmaterialtomakenewpackagingpapers.

SharonLea,StrategicDirectorforEnvironmentandCulture,BirminghamCityCouncil:“BeingabletorecycleBirminghampaperandcardboardinBirminghamwhilstcreatinglocaljobsforBirminghampeoplewasafantasticgoodnewsstoryfortheCityandthatrecyclingcontinuedtobeaveryimportantpartoftheCouncil’sstrategytofurtherreducetheamountofwastethatgoestolandfill.RecentinitiativesbetweentheCityCouncilandSmurfitKappaRecyclinghavetargetedBirminghamschoolstoprovideinformationandlocalrecyclingfacilitiestoyoungpeopleandworkisstartingtoencouragelocalbusinessestorecyclerecoveredpaperandcardboard.from1993,whenjust750tonnesofpaperwassegregatedforrecycling,therelationshipbetweenbothorganisationshadbecomeincreasinglyimportanttothelocaleconomyandhelpingtoreduceharmfulgreenhouseemissions.

Antonella Baldini, Mayor of Camposanto, Italy.


italy: fund raising campaign PanaroAntonella Baldini,MayorofCamposanto,Italy

“Inthenightof20May2012anearthquakecameintoourliveswithunprecedentedviolence.Weneverexpectedacatastropheofthiskind,butthefactthattheearthquakehadcausednovictimswasanewstartingpointforthe3,300inhabitantsoftheCityofCamposanto.Weimmediatelystartedtorestoreourbuildings,butitwasthesecondearthquakeof29Maythatliterallybroughtustoourknees.About230peoplefoundrefugeinanemergencycamp.AlmostallSmurfitKappaemployeessuffereddamagesfromearthquake:thehousesof61peoplewereseriouslydamagedand63morelightlyaffected.Despitethis,manyofthemvolunteeredtohelpothers.Peoplewentonworkinginspiteofthedamages.Themanagementteamfocusedonitspeoplefirst alsohelpingthemtocopefinanciallywiththiscatastrophe.Thecompanyhasdemonstratedgreatcommitmenttoourcommunitybyremaininginthetownandcontributingtoitsrebirth.IwanttothankSmurfitKappa,particularlytheplantmanager MorenoDonati,onbehalfofmyselfandthewholecommunity.Heneverfailedtohelpwherethe needwasurgent.Theplanofreconstructionwill belonganddifficult,butwemustviewthisterribleearthquakeasanopportunitytorebuildourcityevenbetterthanbefore.Wemustpassabetterfutureontoourchildren,thecitizensoftomorrow.”



Colombia: “Smurfit kappa School has improved my standard of living”

SmurfitKappafullyrecognisestheresponsibilitythatcomeswithitsparticipationintheruralcommunitiessurroundingitsforestrylandbase.InconjunctionwiththeSmurfitKappaCartóndeColombiafoundation,SmurfitKappahelpstoimprovethelivingconditionofthecommunitieswithintheareaofinfluenceoftheforestryoperations.Inaddition,continuingeducationandtrainingprogrammesareheldforforestryworkers,withforestryskillsandhealthandsafetyatworkbeingthemostimportant.TheInstitutoTécnicoAgropecuarioyforestalSmurfitKappaCartóndeColombia(ITAf)providesformalhighschoolleveleducationtoteenagersofthecommunitiessurroundingtheSmurfitKappaforestryoperations.WilliamLopezisaformerstudentandWilsonObandoisthefatheroftwostudents.Theytellushoweducation,thatwasmadepossiblebySmurfitKappa,impactedtheirlives.

WilliamLopez:“Istudiedagriculture,livestockandforestrypracticesattheITAf.Itnotonlyhelpedmetoimprovetheproductionofourfamilyfarm,butalsotoraiseourcropqualityandtobecomemorecompetitive.WegrowPergaminocoffeethatisexported.AttheSmurfitKappaSchoolIlearnedaboutenvironmental,socialandeconomicsustainabilityissues.Iapplythatknowledgeonadailybasisatourfarmandvolunteer forsocialprojects.”

WilsonObando,fatheroftwoITAf-students:“Mytwo girlsarenowstudyingattheUniversity.Itisagreatexperience.Throughspecialloans,Iwasabletoexpandmyactivitieslikefarmingbeansandcoffeebeans,andoperatingabakeryandapaperandsuppliesshop.Thismadeitpossibletoearnenoughtofundtheeducation ofmydaughters.AccesstoITAfservices,liketrainingformeandmywife,hasimprovedmystandardofliving. AtITAfpeoplecareaboutusandmotivateus.”

Wilson Obando, father of two students at ITAF.

William Lopez, former student of ITAF.


Colombia: Biofuel Briquettes open a world of opportunities

SmurfitKappainColombia,GasesdeOccidenteandthetrainingorganisation,CentrodeCapacitaciónDonBoscohavejoinedforcesonalocalprojectfortheproductionofbiofuelbriquettes.ByusingforestryresiduesfromlocaltreessuchaspineandEucalyptustreesandthestumpsofcoffeeplantsasrawmaterialforthesebiofuelbriquettesmultiplesustainabilityobjectiveswererealised.Theprojectgeneratesemploymentandincomeforthecommunity,preventsloggingofnaturalforestsandrecycleswasteproducts.Thebriquettesarealsoaninnovativeandenvironmentallyfriendlyfuelforheatingboilersandcookingstoves.Athirtycentimetresbriquettecangenerateheatforsixhours.

MostrawmaterialscomefromtheforestryplantationsofSmurfitKappaCartóndeColombia.Thecoffeestumpsaresuppliedbylocalfarmers.TheproductionplantforthebiofuelbriquettesislocatedinSantanderdeQuilichaoandthenecessarymachinerywasdonatedfromSwitzerland.

The netherlands: Putting books in their box - the library project

SmurfitKappaTWINCORRinHoogeveenfoundaverycreativeapproachtohelpitscommunity.Itwasaskedtosupportaninitiativeinwhichfivelocallibrariesclosedtheirdoorstoformonelargelibrary.

Thechallengewastoremoveandstoremorethan100,000booksandCD’sforaperiodoffiveweeks.InsteadofmakingafinancialcontributionSmurfitKappaTWINCORRaimedforapracticalsolutioninwhichthelocalcommunitywouldparticipateandeventuallywouldbestimulatedtovisitthenewlibrary.Incooperationwiththelibrarymanagementandsponsors,SmurfitKappaTWINCORRdeveloped10,000specialbook-likeboxes.LibrarycustomerscouldfilltheboxeswithbooksandCD’sandreturnthemtothenewlibraryfiveweekslater.Toinvolvetheyouthaswell,abook(box)coverdrawingcompetitionwasorganised.Togethertheseboxesformedahugewallaspartofanexhibitionat thenewlibrary.

Colombia: El Caracolí welcomes 108 new children

ElCaracolí,theCentreforIntegralEarlyChildhoodDevelopment,islocatedclosetoSmurfitKappaCaliinthemunicipalityofYumbo.Thecentrewhichoffershelptointotalapproximately150youngchildrenhasthesupportofthefundaciónSmurfitCartóndeColombiaandsomeotherinstitutions.

ElCaracolíseekstogenerateapositiveandessentialchangeinchildren,youngerthanfiveyearsofage,andtheirfamilies.ToachievethisElCaracolípromotesintegralcareandearlyeducationinlowincomecommunities.Companiesandpeoplecancontributetothe‘SeedsforElCaracolí’sothatmorechildrenwillhaveabetterfuture.EmployeesofSmurfitKappainColombiacanmakeadditionalcontributionstoElCaracolíbyjoiningtheinitiative‘ZeroWaste’.EachkilolessoffoodwastedfromthecafeteriasoftheCali,Bogotá,andMedellínplants,resultsinmorehealthyfoodfor thechildrenprovidedandsponsoredbySodexo,thecompanythatmanagesthecafeteriasinthoseplants.

Smurfit Kappa TWINCORR in the Netherlands aimed for a practical solution, special book-like boxes, in which the local community could participate and be encouraged to visit the new library.

Companies and people can contribute to the ‘Seeds for El Caracolí’ so that more children will have a better future.

Checking on the local project, for the production of biofuel briquettes, between Smurfit Kappa in Colombia, Gases de Occidente and training organisation Centro de Capacitación. From left to right: Paula Andrea Vivas - Centro de Capacitación, Arturo Gutierrez - Gases de Occidente, Bernardo Guzman - Smurfit Kappa Cartón de Colombia, and Fr. Germán Londoño - Don Bosco Centre.


Germany: Smurfit kappa South Germany fights youth unemployment

About10%ofallyoungadultsinGermanycannotfindentryintovocationaltraining.Thankstothesystematicinvolvementofstakeholdersfromindustry,governmentandsocietyaspecialsixmonthsprogramme,named“Joblinge”,isabletohelpyoungpeoplestartacareer.

SmurfitKappaWellpappeZwiesel,partofSmurfitKappaSouthGermanywithintegratedcorrugatedplantsinPlattling,Neuburgandfeucht,supportstheprogrammethatwasinitiatedbyTheBostonConsultingGroupandtheEberhardvonKuenheimfoundationofBMWAG.Theresultsareremarkable:60%oftheyoungparticipantsmanagetoenteracompanytrainingprogramme.SmurfitKappaWellpappeZwieselisdedicatedtohelpfightthegrowingyouthunemploymentprobleminGermany.Theirfocusistosupporttheyoungadultstolearntotrusttheirowntalents,developnewskillsandsecureemployment,sothattheycanimprovetheirsocialcircumstances.

Ireland: Smurfit kappa charity cycle in aid of lauralynn, ireland’s first children’s hospice

SmurfitKappa’sGroupofficeinDublinorganisedamulti-daycharitycycleeventfromEdinburghtoDublininSeptember2012withallproceedsraisedgoingtowardsLauraLynn,Ireland’sonlychildren’shospice.

Thevolunteercyclistscompleteda50kmclimbfromEdinburghtoLanarkondayone,daytwoentaileda160kmcycletoStranraerandfinallytheycompletedthealmost400kmthatdividesEdinburghfromDublinwithacycleof180kmfromBelfasttoDublinwheretheywerejoinedandcheeredbyalargenumberofcolleaguesfromtheGroupheadofficecompletingasuccessfulevent.

Thejointeffortraisedover€52,000forLauraLynn,whoplantousepartofthismoneytobuildaMulti-SensoryGarden.LauraLynnhasbeendescribedasa‘homefromhome’thatcaresforchildrenandtheirfamilieslivingwithlife-limitingandlife-threateningconditions.LauraLynnstrivestoputlifeintoachild’sday,makingthemostoftheirshortandpreciouslives.SupportinginitiativessuchasLauraLynnishowSmurfitKappamakesitscommitmenttoinvestinlocalcommunitiestangible.

Venezuela: Control vegetation fires – extinguish community problems

TheVenezuelanforestryDivisionofSmurfitKappahasfoundanotherwaytohelpthecommunityaroundforestfarmsneartothetownofOspino.TwentyyearsagotheforestryDivisioninitiatedavegetationfirebrigadetocombatthefiresthatoccurduringthedryseasonfromDecembertoApril.

Thefire-fightersfromthe“forestProtectionCentre”areverymotivatedtogivetheirservicestothenearbycommunitiestoprotectpeopleandcrops.TheVenezuelanwesternplainsanditssavannahareverypronetowoodlandfires.During2012theSmurfitKappafirebrigadeassistedthelocalcommunitybyfighting81firesoutsideourownforests.Thesefirestypicallyoccurinnaturalforestsoronagriculturalland.

Richard Ellerbeck at work at Smurfit Kappa in Zwiesel, Germany. The systematic involvement of stakeholders with different backgrounds in a special six month programme, called Joblinge, is designed to help young people to start a career.

Smurfit Kappa’s Group head office in Dublin, Ireland organised a multi-day charity cycle event with all the proceeds raised going towards LauraLynn, Ireland’s only children’s hospice.

The Forestry Division of Smurfit Kappa in Venezuela assisted the local community by fighting 81 fires outside our own forests.


Venezuela/Mexico: Building the future by renovating schools

In2012,SmurfitKappainVenezuelaandMexicosupportededucationbysponsoringtherenovationofsomeneighbouringschools.Supportrangedfromprovidingtools,expertiseorthefinancestorenovatefacilities.

ThesalesdepartmentofourValenciapapermill ofSmurfitKappainVenezuela,initiatedaself-financingprojecttohelpHighSchoolBolivariano,locatedclosetothemill.Twoclassroomswereremodelled,woodworkmaterialsandtoolsdonated,andSmurfitKappahelpedtheschooltoset-upaprogrammetoselltheirwoodworksotheycangenerateincomethemselveswithwhichmoreapprenticeshipprogrammescanbefinanced.AnotherexampleisSchoolVicenteGuerreroinMexicolocatednexttotheSmurfitKappaCerroGordopapermill.Morethan900students,parents,teachersandSmurfitKappaemployeescametogetherforafestiveopeningoftherefurbishedbathroomsthatweremadepossiblebySmurfitKappa.Theschoolitselfdidnothavethefinancestoundertaketheproject.

Argentina: Smurfit kappa in Sunchales cooperates with municipality in Quality of life project

SmurfitKappaSunchalestogetherwithanumberofotherlocalstakeholderssignedanagreementwiththemunicipalityofSunchalesaimedatimprovingthestandardoflivinginthecityandtheregion.

Throughthiscooperation,whichisinitiallyforaperiodofthreeyears,theinvolvedpartiescommitthemselvestocooperateonissueslikeelectricitysupply,thehandlingofcitywaste,transportation,logistics,andthedevelopmentofsustainableproductionareas.Effortswillbemadetorealiseanagri-foodindustrialpark,acogenerationpowerplant,alogisticalhuband atreatmentplantforsolidandliquidwaste.furthermorethepartieswillcooperateonadoptingcommonpoliciestoprotecttheenvironment,conservenaturalresources,promotesustainabledevelopmentandexchangeinformationonenvironmentalissues.Inadditionthepartieshaveagreedtopromotescientificresearchandthedevelopmentofcleantechnologies.

Italy: Solidarity in aftermath of major earthquake

InMay2012theregionaroundourplantinCamposantosulPanaro,closetoBolognaandModenainItaly,wasstruckbytwoearthquakesmeasuring6.0and5.8ontheRichterscale.Manypeoplediedorwereinjured.Churches,factoriesandhousescollapsed,leaving14,000peoplehomeless.

Toprovideimmediatehelptothosecolleagueswhosuffereddamagetotheirhomes,SmurfitKappaItalyorganisedafund-raisingcampaign.Atotalof€157,000wasraisedforSmurfitKappaemployeeswhowerevictimsoftheearthquake.ThissumwasachievedthroughaninitialdonationbySmurfitKappa’s1,300Italianemployeesofaround€60each.ThetotalemployeedonationwasthendoubledbySmurfitKappa.Two-thirdsofthetotalsumwasdividedamong15colleagueswhohadsufferedmajordamagetotheirhomes.Localauthoritieshadprepared“safe/unsafedeclarations”forthehousesinthearea,andtheseprovidedobjectivecriteriaforthefullytransparentprocessofdecidingwherethefundsweremostneeded.Theremainingone-thirdofthemoneywasgrantedto46employeeswhosehomeshadsufferedminordamage.

In 2012, Smurfit Kappa in Mexico (picture above) and Smurfit Kappa in Venezuela (top picture) supported education by sponsoring the renovation of some neighbouring schools. Support ranged from providing tools, expertise and the finances to renovate facilities.

“The Sunchales Municipality acknowledges the support from Smurfit Kappa for the programme called “a better life”. From left to right: Ezequiel Bolatti - Mayor of Sunchales and Gerardo Lattanzi - Plant Manager of the Smurfit Kappa Sunchales plant in Argentina.”



Colombia - 50th Anniversary fundación Smurfit Cartón de ColombiaSustainabledevelopmentmanagementpracticeshavebeenanintegralpartofSmurfitKappainColombiasinceitsoperationsstartedin1944,longbeforethetermwasintroducedinthebusinessworld.forexample,50yearsagothecompanyfoundedfundaciónSmurfitCartón deColombia.

Thefoundationwasinitiallyestablishedtoimprovethelivingstandardsofthelocalpersonnelandtheirfamilies,andtohelptheirchildrengetaneducation.OvertheyearsthelatterhasbecomethemainfocusoffundaciónSmurfitCartóndeColombia.

development of local communityWhentheforestryDivisionwasestablishedin1969, thescopeofthefundaciónbroadened,alsoassumingresponsibilityforfacilitatingthedevelopmentandimprovementofcommunitieslocatedinproximity toitsplantations.

“Theeconomicstrengthofthefundaciónhasbeennoteworthy”,statesEdgarMuñoz,anattorneyandformeremployeeofSmurfitKappainColombia,whoactivelyparticipatedinthedevelopmentofthefundación. “InadditiontobeingashareholderinSmurfitKappaCartóndeColombia,wehavesecuredthecommitment ofdomesticandinternationalorganisationswithwhomwehaveimplementedprogrammesforfarmersand urbancommunities.”

Education, income Generation and Empowerment of CitizensEducationcontinuestobeoneoftheprioritiesforthefundación.Througheducationpeoplecantrulybecomepartoftheirsocietyandattainthesocialequitythecountryneeds.Itmakespeoplecompetitive,provideshelpfulsocialresponsibilityandreinforcesdemocraticvalues.formalandnon-formalstrategieshavebeenimplementedrangingfrombasichighschooleducation,touniversityscholarshipsandcontinuededucationforadults.

Thefundaciónalsocontributestowardstheeradicationofpovertybyimprovingtheincomeoftheneighbouringcommunities.TheIncomeGenerationprogrammestimulateslocalstart-upinitiativesrunbylocalcitizenswholearntoshowleadershipthroughtheseinitiatives. Itofferstechnicalassistanceandadvisoryservices,andpromotessocialandcommunitynetworks.Inthisway thefundaciónensureseffectiveuseofresourcesandmixesitwithsocialsupportmeasuresthatgenerateempowermentandautonomyinpeopleandGrassRootOrganisations;valuesthefundaciónwillcontinuetopursueinthecomingyears.

Colombia - 50th Anniversary fundación Smurfit Cartón de Colombia

lANdMARkS1959Educationalfundforchildreninmemoryof MDfrankC.Carder(deceased).

1962PredecessoroffundaciónSmurfitCartónde Colombia(non-profit)established.

1969forestryprogrammeinCaucaregion,foundationaware ofregionalsocialreality.

1984foundingofhighschoolsandmediumtechnicaleducationinstitutions.

1995Variouspartnershipsandestablishmentoffinancialindependencethroughownershipofcompanyshares.

2002Socialcontributionstoschoolsclosetocustomers andgrassrootsparticipation.

2003Continuededucationforforestryemployees, theirfamiliesandcommunities.

2004fOCUSfundandPublicPrivatePartnershipproject withcontributionofGTZ.

2008ProductivePartnershipstoimproveagriculturaltechnology.Wonaward.

2009SmurfitKappaSocialResponsibilityAwardfor PPPProjectfundedbyGTZ.

2010Co-foundingofElCaracolíIntegralEarlyChildhoodCentrefoundation.

2012Thefundacióncelebratesits50thanniversary.

From left to right: Oscar Rojas and Beatriz Eugenia Mejía - Fundación Smurfit Cartón de Colombia, Germán Jaramillo - Fundación Empresarial para el Desarrollo de Yumbo, María Eugenia Carvajal - wife of Cali mayor, Andrés Felipe Muñoz and Nicolás Pombo - Smurfit Kappa Cartón de Colombia.


international - update on the Smurfit kappa foundationThefoundationwasestablishedinfebruary2011, whentheBoardofSmurfitKappaagreedtoestablisha€3millionfundand,overthesubsequentthreeyears,€500,000couldbeinvestedannuallytofinanceprojectsthatcamewithintheobjectivesofthefoundation.Theremainderofthefundsarenowinvestedandtheinterestwillcontinuetobeavailabletofundworthwhileprojects.

Thefoundationsupportsprojectsinthecountrieswherewehavetheprivilegetooperate,withtheinitialfocusonprojectsinvolvingyoungdisadvantagedchildren(some 7yearsofageandunder)intheareasofhealthandnutrition,basiccareandearlyeducation.Currentlythefoundationsupportsthreesuchprojects-twoinIrelandandoneinColombia.

OneoftheseistheEarlyLearningInitiative(ELI)attheNationalCollegeofIreland.Thisisacommunity-basededucationinitiativeinDublin’sinner-city.TheELIfocusesonhelpingmarginalisedcommunitiesthroughtheprovisionofinnovativeparentandchild-learningsupportprogrammes.ItsaimistowidentheparticipationineducationforallandtoallowchildrentotakeadvantageoftheIrisheducationsystemandhavethesameopportunitiesaschildrenfrommoreaffluentareas.

Thefoundationalsosupportsfledglings-EarlyYearsEducation&Care.Thisprojectisbasedinanunder-privilegedpartofDublinandprovideseducationand

after-schoolcaretochildreninthelocalarea.Thisserviceoffersparentsthechancetoreturntoeducationorworkandalsoprovidesemploymentinthelocalarea.Withthesupportofthefoundation,fledglingsplanstoopenfournewcentreseachyear,overthenextthreeyears.Thissocialenterpriseaimstobeself-sustainableby2016,transformingthelivesofhundredsofchildrenandfamiliesintheprocess.

InColombia,thefoundationsupportsElCaracolí,anearlychildhooddevelopmentcentrecreatedbythefundaciónSmurfitCartóndeColombiainclosecooperationwithotherfoundationsworkinginthecountry.ItislocatedinYumbo,ontheoutskirtsofCali,whereSmurfitKappa’smainproductionplantinColombiaisbased.Thecentreprovidesanintegratedprogrammewhichincludeseducation,nutritionandbasiccare.TheSmurfitKappafoundationhaspledgedtoprovidefundingforElCaracolítoconstructanewcentrefor300under-privilegedchildrenintheregion.

Thefoundationcreateditsownwebsitein2012: www.smurfitkappafoundation.com,providinginformationonthetypeofprojectsthefoundationisfocusingonandhowtoapplyforfunding.

Caracoli: the Foundation supports El Caracolí, an early childhood development centre created by the Smurfit Cartón de Colombia Fundación, in close cooperation with other foundations working in the country.

Early Learning Initiative: The ELI focuses on helping marginalised communities through the provision of innovative parent and child-learning support programmes.

Fledglings: The Foundation also supports Fledglings - Early Years Education & Care project that provides education and after-school care to children in the local area. The Irish Minister for Children and Youth Affairs, Frances Fitzgerald, is shown with some of the participants.


sustainability in ouR business

SmurfitKappaaimstomakethedifferenceinitskeyareaofexpertise:providingcreativeandinnovativepaper-basedpackagingsolutionsthatsupportourcustomers’growthanddevelopment.

Asacustomer-focusedinnovation-drivenintegratedcompanyourprincipleobjectiveistocreateeconomicvalueforourcustomersandotherstakeholderswhileactingresponsiblyinallaspectsofourbusiness.Weconsiderprofitablegrowthasapre-requisitetoadvanceourdriveforsustainability.Webelievethatwhenwecandevelopourbusinessinasustainablewayitwillalsoallowustoprovideourstakeholderswiththecontributiontheyarelookingfor.

Betterpackagingsolutionswillhelpourcustomersadvancetheirownbusiness,progressivedividendsandsharepricegrowthwillrewardinvestorsfortheirfinancialsupport,fairpay,otherbenefitsandpersonaldevelopmentwillcompensateouremployeesfortheircontributions,paymentsfordeliveredgoodsandserviceswillhelpsupplierstodeveloptheirproductsandtheirbusiness.

AsasignificantemployerinmanyofthecommunitiesandregionswhereSmurfitKappaoperateswestimulatetheeconomicdevelopmentofthesecommunities. Ourinvolvementinlocalcommunityprojectsthroughfinancialsupportorvolunteeringactivitiescontributestolocaleconomies.Ourtaxpaymentslocallyandtocountrygovernmentsfurthercontributetoeconomic,socialandenvironmentaldevelopmentinthecountriesinwhich weoperate.

Providingpaper-basedpackagingsolutionsisourcorebusiness.Packagingallowstheglobalpopulationtohaveaccesstoessentialproductssuchasfood,clothesormedicines.Wehelpmillionsofconsumerstominimisewastebysecuringthedurabilityofproductstheypurchase,whileprovidingthatsupportinamostsustainablewayasourpackagingsolutionsrelyonrenewablerawmaterialsandarefullyrecyclable.

1. OuR BuSiNESSSmurfitKappaisoneoftheworld’slargestintegratedmanufacturersofpaper-basedpackagingproducts,withoperationsprimarilyinEuropeandtheAmericas.Wemanufacture,distributeandsellcontainerboard,awidevarietyofcorrugatedpackagingandotherpaper-basedpackagingproductsandmaterialssuchassolidboard,bag-inbox,sackpaperandmachineglazedpaper.

In2012,theGroup’stotalrevenuewas€7,335million,generatinganoperatingprofitof€634millionandearningspershareof€1.08(pre-exceptional).Totalemployeewagesandotherbenefitsamountedto €1,818million.Approximately€4,000millionwaspaidtosuppliersforproductsandservicessuchasrawmaterials,energyandtransportationservices.fortheyear2012afinaldividendof20.5centspersharewasdeclaredandourcorporateincometaxamountedto€71million.

SmurfitKappa’sendcustomersprimarilyuseourpackagingproductstotransporttheirgoodsandasamarketing,displayandmerchandisingaid.Approximately60%ofourcorrugatedproductscustomersareinthefastmovingconsumergoodssectorcomprisingfood,beverageandhouseholdconsumables,theremainderbeingsplitacrossawiderangeofdifferentindustries.



2012 financial Performance Overview

2012 €m

2011 €m

Revenue 7,335 7,357

EBITDAbeforeexceptionalitemsandshare-basedpaymentexpense(‘EBITDA’) 1,020 1,015

EBITDAmargin 13.9% 13.8%

Operatingprofit 634 590

Profitbeforeincometax 331 299

freecashflow 282 394

Netdebt 2,792 2,752

NetdebttoEBITDA 2.7x 2.7x

Basicearningspershare(cent) 111.2 93.0

Pre-exceptionalearningspershare(cent) 108.3 100.1

2. wORkiNG TOGETHER wiTH CuSTOMERSforSmurfitKappa,packagingisnotonlyaboutcollecting,storing,transporting,distributingpreservinggoodsandoptimisingsupplychains.Itisevenmoresoaboutenabling.Ourpackagingsolutionsenableourcustomerstomakethingshappen,toputtheirbusinessmodelstowork.Wearepartofthesupplychainofresponsibleandreputablecustomerswhoarecommittedtosustainability.Weareproudtobethepartnerofchoiceinourfieldofexpertiseformanyofthesecustomers.Ourcommitmenttosustainabilitywillstrengthenthepartnershipswehaveandhelptoformmore.Itwillputusinapositiontodevelopevenbetterandmoresustainablepackagingsolutionsforourcustomers,enablingthemtomeettheirowntargets andcommitments.

Increasingly,customersrequirepackagingtobesustainable,innovative,fitforpurpose,aswellascosteffective.SmurfitKappaworkscloselywithcustomerstomakesupplychainsmoresustainable.forexample,tocompletelyprotectthepackagedproductduringitstripthroughthesupplychain,wedeliver“right-weighted”packaging.Bytakingbothprimaryandsecondarypackagingrequirementsintoaccountourtransitpackagingoftenallowstheprimarypackagingtobeoptimisedleadingtoanoveralllowersustainabilityimpactofourcustomerssupplychain.Ourcreativedesignteamsexplorewhatispossibleinthemost openmindedway.

Workinginnovativelytogetherwithcustomersonpackagingdesignandsupplychainoptimisationhas twomainsustainabilityaspectstoit.


ireland: Sustainability and investors Barry Dixon,HeadofResearch,DavyResearch

Growth,returnsandvalueremainthekeycriteriafortheinvestmentcommunity.Atthispoint,CorporateSocialResponsibilityorsustainabilityisrelativelylowonthelist ofcriteriaemployedbymostinvestors.

Whatisemerginghoweverisanewsegmentontheinvestmentmarketwhosemainfocusistofindgrowth,returnsandvalueamongcompanieswhoaremoreenvironmentallyaware.Thuswehaveseentheemergenceofanumberofenvironmentalindices,suchasthefTSE4Goodseries,designedtomeasuretheperformanceofcompanies“thatmeetgloballyrecognisedcorporateresponsibilitystandards”.OrtheDowJonesseriesofSustainabilityindices.Equally,wehaveseentheemergenceofanumberofsustainability-focusedfundsandinvestmenthouses.Whilesmallcurrently,webelievethisisafastgrowingpartoftheinvestmentmarket.

Sowhatarepotentialenvironmentalinvestorslookingfor inadditiontothecorefinancialvaluationmetrics?Oftensustainabilityissuesfeedintofinancialmetrics,likethenumberofaccidentsatacompany.Thisreflectsthecorporationscaring(orotherwise)attitudetowardsitsworkforce,butaccident-relateddowntimealsoimpactsmarginsandreturns.Equally,energyefficiencyisacriticalfactorformanycompany’sprofitabilityinanenvironmentofsteadilyrisingfuelcosts andanimportantfactorforinvestors.

SmurfitKappaiswellpositionedtofurtherdevelopthistheme.Paper-basedpackagingisoneofthefewtrulyrenewablepackagingmedia.ThroughsignificantinvestmentsSmurfitKappaisactivelyimprovingtheproductionefficiencyofenergyandwaterintensivekraftliner.Thiswillhelpimprovemarginsandattractmanagersofsustainabilityfunds.

Thereisnodoubtinmymindthattheissueofsustainabilityandrespectfortheenvironmentwillcontinuetogrowinimportanceamongtheinvestmentcommunity.Partlydriven bygenuinealtruisticreasons,partlybecausesustainabilityaddstothebottomline.

Sustainability in our Business [continued]


firstly,SmurfitKappacrediblyguaranteesitscustomersthatthepackagingitsuppliesisproducedsustainably,usingmaterialsfromsustainablesourcesandutilisingthecollectivedesignskillsofourglobalteamofdesigners.

Secondly,wealsofocusonhowourpackagingcanminimisethetotalsustainabilityimpactperunitofcustomerproductdeliveredtotheconsumer.AccordingtoastudydonebyINCPEN,theenergycomponentandhencetheCO2 impactofpackagingproductsislessthan5%inatypicalcustomer’ssupplychain.Thepackagingrelatedpositiveindirectimpact(lessdamage/destructionofthepackedproduct,optimisedlogistics,lesswaste,disposal,etc.)ismuchmoresignificantforthesustainabilityofacustomer’ssupplychain.

Itisinthesetwoaspects–packagingdesignandoptimisingourcustomerssupplychain–whereourpackagingcanmakethedeliveryofourcustomers’producttoconsumersmoresustainable.

InpracticethismeansthatformanycustomerswecarryoutevaluationswiththehelpoftheSmurfitKappaweb-basedsuiteofdesignsoftware,Innotools(PackExpert,Paper-to-Box,Innobook),seekingtooptimisethedirectandindirectimpactofourpackagingonsustainabilitythroughtheentiresupplychainofourcustomers.forexample,bychangingthepalletpatternorcasecount,itispossibletoincreasethequantityofproductsloadedonapallet,reducethenumberofroadtrips,andtherebyreducethe CO2 emissionsfromtransportation.

Customer satisfactionAsSmurfitKappastrivestobeacustomer-orientedandmarket-ledcompany,thesatisfactionofourcustomersisofutmostimportancetous.Besidesaimingtoprovideourcustomerswithoptimalpackagingsolutions,wealsowanttoensurethattheyaresatisfiedwithourproactiveapproachandservices.Inanumberofourmills,wehavea‘firsttimeright’monitoringsysteminplacemeasuringthepercentageofproductiondeliveredtothecustomer’ssatisfaction.

Inourconvertingoperations,majorcustomersperformroutinelyqualitychecksonourdeliveredproductsandalsoperformregularauditsonouroperationalprocessesandservices,andotherqualityrelatedperformanceindicators.Toensurecustomersatisfaction,eachcustomerisservedbydedicatedteamsofdesigners,salesandservicepeopleandthisimportantconsiderationisfrequentlydiscussedwitheverycustomer.


international: joint Responsible Sourcing Nestlé and Smurfit kappa

“Responsiblesourcingispartofthetop3prioritiesofNestléProcurement.SmurfitKappa,beingoneofNestlé’slonglastingandprominentcorrugatedboxsuppliers,hasbeenfullyengagedinresponsiblesourcingsince2010”,saysMrVincentQuilici,EuropeanLeadBuyerfromNestlé.

“TheaimoftheResponsibleSourcingAuditistodemonstratethatallofSmurfitKappa’sconversion plantscomplywithNestlé’sethicalandsustainabilityrequirements.ItalsoinvolvesassessmentwithregardtotheNestléResponsibleSourcingGuidelinesspecifyingrequirementsforpracticesthroughoutthesupplychain,suchasfibretraceabilityandmillmanagement.”

“Sincethebeginning,SmurfitKappahasbeenfullycommittedtosupportNestléinitsResponsibleSourcingapproach.Wehaveachievedgreatresultstogethersincetheinitiationoftheprogrammein2010uptothepresentin2012.Tocontinuethisjourneyandensurefurtherprogress,ajointthreeyearworkingplanhasbeenimplementedbyNestléandSmurfitKappa.Itismonitoredonamonthlybasis.”

“Lookingaheadofus,thefocusofourupcomingactivitieswillconcentrateontraceability,waterandenergyconsumption,ourcarbonfootprintandtheimpact onbiodiversity”,concludesMrQuilici.


Germany: flat pallets, high rewards

SixyearsagoinnovationprocessesatSmurfitKappaWellitWellpappenwerkinDelbrückinGermanyresultedinaspecialgluenamedadconnect.DuringthelastsixyearsthisproducthasenabledourGermanoperation torealisevarioussustainablepackagingsolutions,themostrecentonebeingtheadconnectpallet.

Adconnectpalletsaredeliveredtocustomersasflatsheetsofcorrugatedboard.Asaresultjustonetruckcantransportthesamenumberofpalletsthatusedtotakeeighttrucks.Customersneedfarlessstoragespaceandthepalletsareidealforrecycling,becausetheyonlyconsistofonematerial:recyclableboard.Assemblyiseasy,quickanddoesnotrequireanytools.Theareaswhichneedtobeinterconnectedarecoatedwiththeself-adhesiveglue,whichisactivatedbybeingpressedagainstanotherpartwithadconnect.Onceconnectedtheareasbecomeinseparable.Adconnectpalletsareuniqueandreducethecarbonfootprintofourcustomers.

UK: The ‘Aquashield’ Case saves catalogues from spoilage

HomeRetailGroupistheUK’sleadinghomeandgeneralmerchandiseretailer.HomeRetailGroupproducemillionsofArgoscatalogueseachyearfordistributionthroughouttheircustomerbase.Thecataloguesaregenerallystoredoutside inoftendampconditionsatthedistributionwarehousesandatstoreswhichresultinlargenumbersofcataloguesbeingwrittenoffeachyearduetowaterdamage.

TosolvethisproblemSmurfitKappaUKAbercarnworkedcloselywiththePackagingManagersatHomeRetailGroup todevelopacorrugatedsolutionwhichincorporatedan‘Aquashield’linerwhichiswaterproof,secure,durableand100%recyclable.Thenewwaterresistantliner,whichincludesa100%biodegradablePElayer,hashelpedto saveasignificantnumberofcataloguesfromthewastebineveryyearforHomeRetailGroup,therebyreducingcarbonemissionsinbothtransportandprintingprocesses.Aquashieldnotonlyprotectspaperproductsthroughout thesupplychain,italsoreducestheassemblytimeofthecataloguepallets,generatingsignificantcost-savings.

Belgium: The smart dashboard box

SmurfitKappaOlen,inBelgium,designedanewsustainablepackagingsolutionwithfarlessCO2emissionfortheircustomer4flow,byoptimisingthepackagingforMercedesBenzdashboardframes.

Thedashboardframeswereoriginallypackedinf0201packagingwithPE-foamandplastics.ThePE-foamisnotonlyexpensiveandnon-sustainable,italsomakesthepackagingratherbulkytherebylimitingthenumberofproductsthat canbeshippedinacontainer.SmurfitKappaOlenwasable toreplacethePE-foamandplasticcomponentswithfullyrecyclablematerial.Thisprovided4flowwithsustainablepackagingwithfarlessCO2emissionandasignificantcut inthecostsoflogistics.Topackagethesamequantityofdashboards4flownowachievesareductionofalmost 6,000boxesandsome180lesscontainershipments, savingMercedesBenzconsiderablecostsintransportation.

Adconnect pallets are delivered to clients as flat sheets of corrugated board. As a result, only one truck is needed to transport the same number of pallets that used to take eight trucks.

The new water resistant liner, which includes a 100% biodegradable PE layer, has helped to save a significant number of catalogues from the waste bin every year for Home Retail Group.

Smurfit Kappa in Olen, Belgium was able to replace the PE-foam and plastic components with fully recyclable material. This provided 4Flow with sustainable packaging resulting in far lower CO2 emissions and a significant cut in the costs of logistics.


Ourmarketingcommunicationsareessentiallybusiness-to-businessbynature.Inthisregardweensureonacontinuousbasisthattheseareinlinewithallgenerallyacceptedethicalandculturalstandardssuchasavoidingprivacyintrusionordualstandards,notinfluencingvulnerableaudiencessuchaschildrenorportrayinggenderrolesinadisrespectfulway.AspartofourCodeofBusinessConduct,wevoluntarilyadheretotheOECDGuidelinesforMultinationalEnterpriseswhichexplicitlymentionsconsumerinterests.SmurfitKappahasnorecordedincidentsofnon-compliancewithregulationsorvoluntarycodesconcerningmarketingcommunications.

innovation in sustainable packaging solutionsAsamarket-focusedcompany,SmurfitKappaknowsinnovationisofstrategicimportanceinsecuringandretainingourcustomers’business.Innovativedesign isauniquesellingpointforSmurfitKappaandservestodifferentiateusinthemarketplace.Tofosterinnovation,wesharebestpracticeamongtheplantsanddivisionsinSmurfitKappausingourweb-basedtoolssuchasInnobook.WeholdInnovationAwardcompetitionstoassesstheeffectivenessandoriginalityofourjointdevelopmentswithcustomers.ThecompetitionsareheldinbothEuropeandLatinAmerica,withjudgingpanelsdrawnfromourkeycustomerbase.Thesemeasurespromotethepursuitofexcellenceindesignand,mostcrucially,aclosealignmentwiththeneedsofourcustomers.WeintroducedaSustainabilityAwardcompetitionin2012toshowourabilitytocombineinnovationandsustainabilityinthedesignanddevelopmentofhighqualitycustomerproducts. The2013InnovationandSustainabilityAwardswillbeannouncedinSeptemberofthisyearandwillbefeaturedinourSustainableDevelopmentReport2013.

Whenusingdesigninnovationasameansofdevelopingsustainablepackaging,wefocuswithourcustomersonthefollowingaspects:

nDesignpackagingsolutionsthatarebothefficientanduserfriendly.

nOptimisethesupplychain,includingpalletisation,transportation,warehousinganddistribution.

nDevelopfitforpurpose“right-weighted”packagingbasedonexperienceandempiricalmodellinginsteadofhistoricaldata.

nReducecomplexityinthepackagingportfoliotherebyachievinghigherproductivity,lessmaterialusageandlesswaste.

3. CONTRiBuTiON TO lOCAl ECONOMiESWefavourprocuringourproductsandservicesfromlocalsupplierswherepossible.Procurementofgoodsandservicesrepresentsthelargestsinglecategoryofexpenditure.In2012,theGrouppurchasedalmost €4billionofproductsandservicessuchasrawmaterials,energyandtransportation.Theprocurementofanumberofmajoritemsofexpenditurelikerecoveredpaper,paper,energy,chemicals,starchandinksiscoordinatedcentrallytoachieveeconomiesofscale.Still,asignificantpartoftheactualsupplierdeliveriesforthesecategoriescouldbeconsideredaslocaldeliveriesasmanyofthegoodsandservicesareprovidedtousfromsuppliers’productionlocationsinthesamegeographicalareaasouroperations.Duetotheirnature,theremaininggoodsandservicesaresourcedlocallybyouroperations.Intotalapproximately70%ofoursuppliers’deliveriescanbeclassifiedaslocal.Theseinteractionsbetweenouroperationsandlocaloperationsofsuppliersprovidesupportforlocaleconomies.

4. PROduCT RESPONSiBiliTy ANd PROduCT SAfETyAsabusiness-to-businesscompany,weproduceboththerawmaterialforpackagingandthepackagingitself.Mostpackagingproducedbyusisusedfordistribution,transportationandretaildisplaypurposes.

Wehavealwaysdemonstratedastrongcommitmenttoproductsafety.Notonlywillwecomplywithanylegislationonhealthandsafetyaspectsofourproducts,wealsohaveagreedtovoluntarycodesofconductwhich,amongothers,arebasedontheOECDGuidelinesforMultinationalEnterprises.

In2012,therewerenorecordedincidentsofnon-compliancewithregulationsorvoluntarycodesintheareaofproductsafetyandproductresponsibility.

Atallstagesinourproductionprocess,fromthedesignofourproducttoitsdeliverytothecustomer,weassessproductsafety.Asmanyofourproductsareusedastransportpackaging,productsafetymainlyensuresthatourproductsaresafeandeasytouseforthosehandlingandusingthem.Asignificantpartofourpackagingisintendedfortheagri-foodindustry.forthissector,theproductsafetyaspectsmainlyinvolveensuringthatfoodcanbesafelypackedinourproductswhetherthereisdirectorindirectcontactbetweenthepackagingandthefood.Allourproductsarethereforeassessedforhealthandsafetyconsiderations.


Sustainability in our Business [continued]

OurProductSafetyDepartmentwassetuptomanagesuchissues,inparticularwithregardtopackagingindirectcontactwithfood.Thedepartmentisequippedwithalaboratorythatteststhepurityofourproducts(papers,boards,corrugatedandsolidboardpackaging). Itconductsresearchandimplementsdevelopmentprojectsintheareaoffoodcontact.WeregularlysubmitourproductstothesetofanalysesrecommendedbyvariousEuropeanandnationallegislationapplyingto ourproducts.ThisdepartmentisthirdpartyaccreditedaccordingtotheISO17025standard.

TheknowledgedevelopedherehasbeentransferredthroughoutallourproductionoperationsinbothEuropeandLatinAmerica.WefollowtheevolutionofregulationsinallcountriesandareactiveatEuropeanandnationalindustryassociationlevelwithregardtoproductsafetyissues.

Europeanregulationsthatapplytopackagingintendedforfoodcontacthavebeenrevisedandreinforcedoverrecentyears.AsrequiredbytheEuropeanregulationthatappliestopackagingintendedforfoodcontact,theimplementationofGoodManufacturingPractises(GMP)inpapermillsandconvertingoperationsproducingpackagingforfoodapplicationsismandatory.GMPthatfulfilstherequirementsofEUregulationhasbeenimplementedsince2007atallourEuropeanpaperandboardmills.SinceSeptember2012,allourEuropeanpaperandboardmillsarethirdpartycertified.79%arecertifiedaccordingtotheEuropeanstandardonthemanagementofhygieneintheproductionofpackagingforfoodstuffs(CEN-EN15593)andtheremaining21%arecertifiedaccordingtotheInternationalGoodManufacturingPracticeforCorrugatedandSolidBoardPackagingstandard(fEfCO/ESBOGMPStandard).

Inresponsetocustomerneeds,some54%ofourconvertingplantsnowhaveprocessesinplaceandarecertifiedbyoneofthefollowingrecognisedhygienecodesorstandards:ISO22000,CEN15593,BritishRetailConsortium(BRC),AmericanInstituteofBaking(AIB)orInternationalGoodManufacturingPracticeforCorrugatedandSolidBoardPackaging(fEfCO/ESBOGMPStandard).

Itisouraimtocertifyallourconvertingplantsforwhichthisisrelevant.

Asaresultofourcentralset-up,weareabletomonitorourprogressinperformancewithregardtobothsafetyandhygieneforfoodandthisinturnallowsustorespondtoanymarketconcerns.OurProductSafetydepartmentiskeepingaclosewatchforanyfoodsafetyalertissuedbytheEuropeanCommissionornationalauthorities.Ouranalysesandknowledgepermitustomodifyourpapersinresponsetothesealertsintheshortestpossibletime.

Inthecourseof2010someresearchindicatedthattracesofundesirablemineraloilcouldenterpackagedfoodpossiblyresultingfrommineraloilpresentintherecycledrawmaterialforpapermakingand/ortheinksusedforprintingthepackaging.Attheendof2011CEPI,togetherwithsomeothertradeassociations,publishedavoluntarycommitmentcallingonpaperandboardproducersandconverterstophaseouttheuseofmineraloilsinpaperadditivesandprintedinks.Severalpublicauthoritieshavereviewedthepublishedresearch.InMay2012, theBundesinstitutfürRisikobewertung(BfR,orGermanfederalInstituteforRiskAssessment)publishedananalyticalmethodformineraloilsanalysesfortesting bythevariousEuropeanlaboratories.

AccordingtotheBfR,theresearchisstillincomplete.Also,theUKfoodStandardsAgency’spositionisthatthereisnoconcernforconsumers’health.InJune2012,TheEuropeanfoodSafetyAuthority(EfSA)identifiedfoodpackagingasoneofthemanysourcesofmineral oilinfoodandsuggestedsettingupamonitoringprogrammetoidentifysourcesofmineraloilatvariousstagesoffoodproduction.EfSAalsosuggestedthatincaseswhereexposuretothesemineraloilscanbeattributedtopackaging,methodsshouldbedevelopedthatwouldeffectivelypreventmineraloilsfrommigratingfromthepackagingintothepackagedfood.

Althoughnoneoftheresearchandopinionssofarpublishedindicatesthatthereshouldbeanyconcernforconsumers’health,wearetogetherwiththeEuropeanindustryassociationCEPI,cooperatingwiththevariouspartiesinvolvedtodevelopadequatesolutionsfor thisissue.

Registration, Evaluation, Authorisation and Restriction of Chemicals: (REACH)WearemainlyaffectedbyREACHasdownstreamusers ofchemicalsandwethereforeliaisecloselywiththesuppliersofchemicalstoensurethattheyfulfiltheirobligationswithregardtoassurancesthatthechemicalsweintroduceinourproductsdonotcontainanySubstancesofVeryHighConcern(SVHC)inconcentrationsabovethelevelof0.1%.Ourcentralisedprocurementorganisationprovidesuswithanefficientwaytoaccomplishthistask.

TheoverarchingobjectiveofREACHistominimiseorbantheuseofSVHC,mostofwhicharealreadyidentifiedforthetonnagebandof1000.

Thesesubstanceswillbethoroughlyre-examinedandwillthenbeaddedtotheSVHCcandidatelistforfurthermeasures.TheSVHCcandidatelistisupdatedonceortwiceayear.

WhentheupdatedSVHC-listispublishedonECHA’swebsite,ourcustomersroutinelyrequestinformationwhetherourproductscontainSVHCsornot.Wehaveproceduresinplacethatenableustoissuesuchstatementscontinuously.


5. RECOGNiTiONS

Spain - Global PPi Award for innovative Eco TrayThePPI(Pulp&PaperInternational)awardsaretheonlyglobalawardsdedicatedtorecognisingachievementsinthepulpandpapersector.SmurfitKappawonanawardinthe‘AdvancesandInnovationinSustainablePackaging’categoryfortheEcoTray,aspecialcorrugatedtraythatoffersa‘green’alternativetotraditionalpolystyreneandplastictrays.

TheexpertsatSmurfitKappadevelopedathermo-formedcorrugatedboardsolutionforthefruitandvegetablemarket,whichcanalsobeappliedinothersectors.TheEcoTrayis100%recyclable,optimisesstoragespaceandleadstosavingsonCO2 emissions.Moreover,asitissuitableforflexographicprint,highqualityprintandpre-print,itcanbecustomisedtofitthecustomer’swishesthusenablinganimprovedpoint-of-saleprofilefortheconsumer.

united kingdom - Recognition for raising awareness of responsible forestrySmurfitKappaUKhasbeenrecognisedforitsoutstandingcontributiontoraisingawarenessofresponsibleforestryfollowingitsnationwidesupportfortheforestStewardshipCouncil’sinternationalawarenessday.

fSCfriday,theinternationalawarenessday,isacelebrationoftheworld’sforestsandhelpstoraiseawarenessoftheimportanceofmanagingtheseforestsresponsibly,andtherolethatfSCplaysinthis.SmurfitKappawaschosentoreceivethefSCUKawardinrecognitionoftheeducationalandawarenessraisingactivitiesitundertookonfSCfriday2012andhasbeencommendedforitssuccessinreachingouttolocalcommunities.AnumberofSmurfitKappasitestookpartincelebratingfSCfriday,manyworkingwithlocalschoolsandcommunitiestoeducatethechildren ontheimportanceofresponsibleforestry.Internalcommunicationsandactivitieswerealsoorganisedtofurtherraiseawarenessamongourownemployees.

Ross Howat, Global Marketing Director from PPI Award sponsor Elektrokemiska AB assisted by PPI Award host Laura Esposto presented the Global PPI Award in the category ‘Advances and Innovation in Sustainable Packaging’ to Miguel Angel Franco, Smurfit Kappa Spain.

Charles Thwaites, Executive Director, Forest Stewardship Council UK (left), presents the FSC 2012 Outstanding Contribution Award to Mike Fadden, Smurfit Kappa Regional Director East.


Colombia – Smurfit kappa Colombia approved supplier for unileverInSeptember2012,representativesofUnilevervisitedtheSmurfitKappaColombiamanufacturingplantsinCali,MedellínandBogotáwiththeobjectiveofidentifyingsynergiesandtodiscusshowbothcompaniescouldmutuallybenefitfromthoseimprovementopportunities.

SmurfitKappaisaleaderintheproductionofcorrugatedpackaging,pulpandpaperinColombiaandwasverypleasedtohostthevisit.AsaresultofthevisitandbecauseofitssolidperformanceinColombia,UnileverhasacknowledgedSmurfitKappaasanapprovedsupplier.TheSmurfitKappacompanieswereabletomeettherequirementsregardingperformanceandcontinuousimprovementsdemandedbyUnileverduringtwelveconsecutivemonths.SmurfitKappainColombiahasaclearfocusoninnovationandquality,andalongtermstrategyonsustainability.Thecompanyisproudtobe anofficialpartnerofUnilever.

Colombia - Actively involved in good forest managementAccordingtotheforestryCertificationGuidelinesofWorldWildlifefund(WWf)inColombia,SmurfitKappainColombiawasactivelyinvolvedintheformulationoftheGenericIndicatorsforvoluntarycertificationofforestryplantationsandhasbeenworkingcloselywiththeforestStewardshipCouncil(fSC)nationalofficeinColombiaforovertenyears.WWfColombiamentionedSmurfitKappainColombiaasasuccessfulstoryonforestrycertificationinSouthAmerica.

Since1997SmurfitKappaCartóndeColombiahasbeenanactivememberofthefSCandin2003thefSClabelwasgrantedtoourforestplantationsinColombia.Wehaveoneofthefirstcompaniestoreceivesuchaccreditationforitsforestholdings.WehavebeeninstrumentalinhelpingthefSCnationalofficeoverthatperiod,throughregionalworkshopsintheharmonisationofindicatorsforvoluntarycertificationofforestryplantations,aswellasparticipatingduringtherevision ofStandardsandPrinciplesasamemberoffSC.OurplantationsinColombiameasureapproximately69,000hectares,withanannualnetgrowthofapproximately100,000cubicmetresin2012.

From left to right: Orlando Cañaveral – Unilever, José Joaquin González – Smurfit Kappa, Luis Fernando Gomez – Unilever, Laura Realpe – Unilever, Jorge Parra – Smurfit Kappa, Angela Aguilar – Smurfit Kappa, William Muñoz – Smurfit Kappa, Andres Arango – Smurfit Kappa.


Colombia - Public recognition for environmental excellenceforthesecondyearinarowSmurfitKappaemployeesinBogotáreceivedpublicrecognitionfortheirsustainabilityeffortsandresultsincentralColombiafromtheenvironmentalauthoritieswhohandedthecompany aprestigiousaward.

SmurfitKappawasawardedthetrophyforitscontinuousimprovementsduringtheyear2012withregardtosustainabilityandforitsenvironmentalmanagementsystem.TostimulatesustainableeffortsthedistricthassetupanEnvironmentalExcellenceProgramme.TheMayorofBogotá,onbehalfoftheDistrictEnvironmentalDepartment,publiclyrecognisedSmurfitKappa’swinintheEnvironmentalExcellencecategoryandstatedthatthecompanyisaleaderinenvironmentalmanagementandenvironmentalperformanceinthedistrict.Thejuryevaluatedvariousaspectssuchas:environmentalmanagement,cleanerproductionandcorporatesocialresponsibility.

6. SuPPliER iNiTiATiVES

international - ink supplier Siegwerk colours the planet greenSiegwerkisaworld-leadingsupplierofprintingink forpackagingandpublicationpurposeswithitsheadquarterslocatedinSiegburg,Germany.Thecompanyrecentlyintroducedanewgenerationofsustainableinkproductsbasedoninnovativehybridtechnology.

Thebreakthroughwasrealisedafterextensiveresearchinapartnershipwithmajorchemicalcompanies.Siegwerkconcludedthatenvironmentalandeconomicadvantagescanverywellbeachievedthroughacombinationofrenewablematerialswithclassicalchemicalproductionand/orfossilproducts.Atotallynewpolymer,a‘hybrid’ ofbio-monomers,isutilisedasabinderwith‘standardoilderivate’acrylicmonomers.Thisallowstheformulationofpremiumqualityink.Toincreasetherenewable

contentofitsinkevenmore,withoutlosingperformanceorincreasingcosts,Siegwerkwillfurtherresearchitshybridtechnology.Itstrivestodemonstratethatwaterborneinkscanmaketheworldgreenerandstillperformsatisfactorilyforcommercialusage.

Wewelcomesuppliersthatcontinuouslysearchforanddevelopproductsthathelptomakeourpackagingsolutionsmoresustainable.

international - Sustainability key element in relationship with flint Group flintGroupisoneofourlargestinksuppliersinEuropeandhasbeenasupplierformanyyears.Thetwocompanieshavedevelopedalongtermconstructiverelationshipwithafocusonanumberofkeyaspectsofthesustainabilityagendalikeanti-corruption,labour,humanrightsandtheenvironment.

JanPaulVanderVelde,SeniorVicePresidentProcurement,Sustainability,RegulatoryandIT,flintGroup,elaborates:“fundamentally,webelievethatourpartnershiprevolvesaroundsharingbestpracticesandfindinga’betterway’together.WiththehelpofSmurfitKappawehavealreadyinitiatedaprogrammetodevelopanevengreaterrangeof“environmentallyfriendlier”inksandwhileIbelievethatthetwocompaniescanbothbeproudofwhatwehavealreadyachieved-Ialsobelievethatwehavegreaterachievementsaheadofusaswelooktoshareasustainablefutureforourindustry.”

“flintGrouphasadoptedtheUNGlobalCompactframeworkandaverymodernCodeofConduct.furthermore,itutilisestheDowJonesSustainabilityIndextoreportonitsprogressinanannualSustainabilityReport.ThiscombinationofflintGroup’sownmissionandguidingprinciples,adoptedbyallemployeesandalignedtotheworld’sleadingsustainabilitymodels,ensuresthatwe‘notonlydowhatwesay,butsaywhatwedo’.”

Smurfit Kappa employees (left to right): Hugo Romero, Luis Fernando González, Juan Pablo Perez, Maritza Ochoa, Sergio Segura, Alvaro Zambrano were presented with the prestigious award for recognition for Smurfit Kappa’s sustainability efforts and results in central Colombia.


iNPuT/OuTPuT fOR 2012All EuROPEAN OPERATiONS

input outputWood and fibre Production

Wood(1) 4,690 kTonnesar Papers(Allgrades) 4,671 kTonnes

Marketvirginpulp 104 kTonnesar CorrugatedPackaging* 4,490 kTonnes

Otherpulp 21 kTonnesar BoardandlaminatedBoards* 869 kTonnes

RecoveredPaper 4,300 kTonnesar ConvertedBoard* 312 kTonnes

PaperorBoardpurchased 1,602 kTonnesar Sacks - kTonnes

Plasticfilms,otherplasticitem(BIB) 18 kTonnes Otherpackaging 17 kTonnes

Starch(alltypes) 255 kTonnesar

Inorganicrawmaterials 232 kTonnesar Direct emissions to air

Otherorganicrawmaterials 186 kTonnesar CO2fossil 1,827 kTonnes

CO2biogenic 3,169 kTonnes

Dustfromfuels 0.4 kTonnes

soxfromprocesses 0.6 kTonnes

noxfromprocesses 3.8 kTonnes

Energy Energy output

Energyfromfossilfuels 30,605 TJ Electricitytothirdparty 305 GWh

Energyfrombiofuels 5,229 TJ Thermalenergytothirdparty 226 TJ

Electricityfromgrid 1,707 GWh Biomasssold 2,040 TJ

Wastes

Hazardouswastes 10 kTonnes

Non-hazardouswastessenttolandfill 248 kTonnes

Non-hazardouswastesrecovered 292 kTonnes

Othernon-hazardouswastes 29 kTonnes

Water Discharges to water

Waterintake(2) 90 mm3 Waterreleased 82 mm3

COD 21 kTonnes

bod 7.6 kTonnes

TotalSuspendedSolids 3.7 kTonnes

n 0.5 kTonnes

p 0.07 kTonnes

kTonnesar:kiloTonnesasreceived(1)wood&sawmillchipsasdeliveredtothemill(2)waterintakeincludesrainwaterandwastewaterfromanotherorganisation

*partlyproducedwithSmurfitKappapaperorboard

Thetablereportstotalenergyconsumptionofthesite,takingintoaccountthefuelsusedtoproduceelectricityand/orthermalenergysoldexternally.Thisresultsindifferentfiguresfortheseparameterscomparedtothose onpages78to83.Thelatterpagesshowtheenergyconsumptionfortheproductionofthepaperorboardmanufactured.


iNPuT/OuTPuT fOR 2012All lATiN AMERiCAN OPERATiONS

input outputWood and fibre Production

Wood(1) 1,000 kTonnesar Papers(Allgrades) 896 kTonnes

Marketvirginpulp 4.9 kTonnesar CorrugatedPackaging* 743 kTonnes

Otherpulp - kTonnesar BoardandlaminatedBoards* 168 kTonnes

RecoveredPaper 856 kTonnesar ConvertedBoard* 61 kTonnes

PaperorBoardpurchased 231 kTonnesar Sacks* 51 kTonnes

Plasticfilms,otherplasticitem(BIB) 1.9 kTonnes Otherpackaging 1.9 kTonnes

Starch(alltypes) 27 kTonnesar

Inorganicrawmaterials 94 kTonnesar Direct emissions to air

Otherorganicrawmaterials 39 kTonnesar CO2fossil 988 kTonnes

CO2biogenic 483 kTonnes

Dustfromfuels 0.2 kTonnes

soxfromprocesses 2.7 kTonnes

noxfromprocesses 0.9 kTonnes

Energy

Energyfromfossilfuels 14,832 TJ Energy output

Energyfrombiofuels - TJ Electricitytothirdparty - GWh

Electricityfromgrid 554 GWh Thermalenergytothirdparty - TJ

Biomasssold - TJ

Wastes

Hazardouswastes 2.5 kTonnes

Non-hazardouswastessenttolandfill 317 kTonnes

Non-hazardouswastesrecovered 31 kTonnes

Othernon-hazardouswastes 2.4 kTonnes

Water Discharges to water

Waterintake(2) 36 mm3 Waterreleased 32 mm3

COD 15 kTonnes

bod 3.9 kTonnes

TotalSuspendedSolids 4.0 kTonnes

n 0.2 kTonnes

p 0.02 kTonnes

kTonnesar:kiloTonnesasreceived(1)woodasdeliveredtothemill(2)waterintakeincludesrainwaterandwastewaterfromanotherorganisation

*partlyproducedwithSmurfitKappapaperorboard

Thetablereportstotalenergyconsumptionofthesite,takingintoaccountthefuelsusedtoproduceelectricityand/orthermalenergysoldexternally.Thisresultsindifferentfiguresfortheseparameterscomparedtothose onpages78to83.Thelatterpagesshowtheenergyconsumptionfortheproductionofthepaperorboardmanufactured.


EuROPEAN MillS 2012 ENViRONMENTAl dATA

Nettingsdorfer,

Austria

Navarra,Spain

CelluloseduPin,

france

Piteå,Sweden

Morava,Czech

Republic

CDHaupt,DE

Hoya,DE

Viersen,DE

Zülpich,DE

Mengibar,ES

AlfaD'Avignon,

FR Rethel,fR

Saillat,fR

Ania,IT

Roermond,NL

SSK,UK

TownsendHook,

UK

BadenKarton,

de

Herzberger,DE

OudePekela,NL

Hoogkerk,NL

Coevorden,NL

Nieuw

eschans,

nl

Nervión,ES

Tota

l Mil

ls

bkl,tl tl,mgpaper

bkl,wtkl,wttl

wtkl,bkl tl,fl fl,tl,sb,wttl

fl,tl,cart

fl,tl fl,tl fl,tl,wttl

tl tl fl,tl fl,tl tl,fl tl,fl fl,tl cart sb sb sb sb sb sackpaper

PRODUCTIOnPRODUCTIOn kTonnes 434 105 394 658 60 316 395 75 470 202 70 60 248 207 568 203 218 138 245 57 73 92 106 147 5,541

EnERGy Electricity Co&SelfGeneration GWh 155 58 322(1) 339 - 67 91 - 172 108 - - 59(1) 34 117 65 82(1) 61 76 16 - 12 29 110 1,974

Hydropower GWh 0.1 - - - 2.0 0.2 - - - - - - 1.5 - - - - 1.7 - - - - - - 5.5

NetGridsupply GWh 141 80 - 249 22 31 72 23 20 -(2) 30 21 60 41 35 0.3 8.8 -(2) 10 -(2) 14 13 -(2) 81 954

Totalelectricity GWh 296 139 322 588 24 98 163 23 192 108 30 21 120 75 152 66 91 63 87 16 14 24 29 192 2,933

Fuel usage

Biofuels TJ 3,687 1,989 7,819 9,987 17 40 67 - 256 - - 15 124 12 140 50 - - - - - - - 2,733 26,935

fossilfuels TJ 1,106 441 449 303 319 1,567 2,218 344 3,243 1,488 368 286 1,475 1,149 2,849 1,376 2,081 1,055 1,571 359 310 344 605 121 25,430

Totalfuels TJ 4,793(3) 2,429 8,269 10,290(3) 336 1,607 2,285 344 3,499 1,488 368 301 1,599 1,161 2,990 1,426 2,081 1,055(3) 1,571(3) 359 310 344 605 2,854 52,364

WATER WITHDRAWAl

Surface mm3 13 5.2 8.4 34 0.4 0.4 - - 2.0 1.6 0.7 - 1.9 1.5 2.2 - 1.2 1.5 3.4 0.0 0.3 0.3 0.4 2.6 80

Ground mm3 - - 0.9 - - 0.8 2.1 0.3 0.4 - - 0.5 - - - 0.9 0.3 - 0.0 0.2 - 0.2 - - 6.6

Grid mm3 0.05 0.01 0.02 0.10 - - 0.2 - 0.01 0.1 - 0.01 0.01 - 0.1 0.1 0.02 0.03 0.01 0.01 0.01 0.1 0.1 0.02 1.0

Totalwater(4) mm3 13 5.2 9.3 34 0.4 1.2 2.3 0.3 2.4 1.7 0.7 0.5 1.9 1.5 2.3 1.0 1.5 1.5 3.5 0.2 0.3 0.6 0.4 2.6 88

DISCHARGES

To air

CO2fossildirect kTonnes 63 28 27 26 18 88 124 19 261 84 21 16 84 64 161 78 117 59 88 20 18 20 34 7.8 1,528

CO2fossilindirect kTonnes 23 24 - 11 11 13 31 10 8.8 - 2.7 1.9 5.4 16 13 0.6 4.0 - 4.5 - 5.2 4.7 - 24 215

CO2biogenic kTonnes 396 221 900 1,191 1.3 3.5 5.6 - 22 4.7 1.0 1.2 18 0.9 11 4.6 4.6 - - - - - 0.6 338 3,124

Dust Tonnes 54 20 49 277 0.15 - 0.4 - 0.4 0.2 0.3 0.8 - - - - - - 0.45 - - - - 41 443

noxasNO2 Tonnes 234 109 603 785 10 50 95 6.4 262 381 17 28 86 77 130 128 374 32 72 21 6.0 16 40 174 3,735

soxasNO2 Tonnes 25 28 132 91 5.3 0.2 1.4 0.3 73 12 11 5.3 1.5 0.5 27 1.7 70 0.5 11 0.05 0.03 0.1 2.3 91 590

To water

Processwater mm3 5.3 2.8 8.8 13 0.3 0.4 1.7 0.3 - 1.4 0.6 0.4 1.6 1.2 1.7 0.6 1.2 1.3 1.3 0.2 0.2 0.1 0.3 1.9 47

Coolingwater mm3 7.1 2.2 - 21 - 0.4 0.02 - 1.3 - - - - - - - - 0.1 1.9 - - 0.3 - - 34

COD Tonnes 7,076 321 4,293 2,151 39 97 334 N/A - 229 74 48 954 125 316 1,026 161 161 175 25 35 868 51 795 19,355bod Tonnes 4,273 60 1,182 294 2.4 4.5 17 N/A - 18 10 5.1 252 9.1 10 460 7.3 10 13 0.7 1.6 379 2.2 189 7,200TotalSuspendedSolids Tonnes 457 75 593 572 4.1 2.6 - N/A - 90 17 6.4 398 22 24 916 40 12 22 4.1 4.7 22 4.9 71 3,358TotalN Tonnes 41 10 88 66 6.3 0.3 19 N/A - 43 2.7 2.6 87 23 31 23 4.4 0.8 1.8 1.1 2.0 3.8 1.7 9.5 468TotalP Tonnes 3.4 0.6 11 16 0.3 0.2 1.2 N/A - 2.7 3.3 0.5 15 1.8 3.0 11 0.3 0.1 0.3 0.1 0.3 0.2 0.2 0.8 72Solid wastes

Totalnon-hazardouswastes Tonnes 23,618 18,837 33,012 40,002 7,523 18,167 30,114 7,694 24,144 31,994 4,083 5,215 23,312 22,225 37,761 23,400 35,297 12,258 19,091 5,470 2,095 4,950 7,535 82,501 520,297

Landfill Tonnes 3,288 1,123 11,611 5,863 3,743 89 - - 11,821 31,857 4,079 1,532 20,279 12,274 602 21,909 26,686 - 79 - - - - 78,291 235,125

Recovery Tonnes 20,097 17,714 21,384 34,139 3,780 18,078 30,114 7,693 1,416 137 4.2 3,683 3,033 9,952 37,071 1,491 8,611 311 19,012 5,470 2,095 4,950 7,407 4,169 261,809

Other Tonnes 233 - 18 - - - - 0.2 10,907 - - - - - 89 - - 11,947 - - - - 128 41 23,363

Hazardouswastes Tonnes 136 31 5,294 235 1.5 80 90 2.4 42 15 4.7 7.2 6.8 9.0 21 37 64 231 14 8.3 3.3 20 10 65 6,429

bkl :brownkraftliner mg:machineglazed wtkl:whitetopkraftliner (1)CHPisoutsourced N/A:notavailable cart:cartonboard sb :solidboard wttl:whitetoptestliner (2)netelectricityexportedbyCHP fl :recycledflute tl :testliner water emissions in grey italics: external waste water treatment (3)partofheatexported (4)Totalwaterincludesrainwaterandwastewaterfromanotherorganisation Individual cell entries have been rounded. The figures in the total column may not tally due to rounding differences.


Nettingsdorfer,

Austria

Navarra,Spain

CelluloseduPin,

france

Piteå,Sweden

Morava,Czech

Republic

CDHaupt,DE

Hoya,DE

Viersen,DE

Zülpich,DE

Mengibar,ES

AlfaD'Avignon,

FR Rethel,fR

Saillat,fR

Ania,IT

Roermond,NL

SSK,UK

TownsendHook,

UK

BadenKarton,

de

Herzberger,DE

OudePekela,NL

Hoogkerk,NL

Coevorden,NL

Nieuw

eschans,

nl

Nervión,ES

Tota

l Mil

ls

bkl,tl tl,mgpaper

bkl,wtkl,wttl

wtkl,bkl tl,fl fl,tl,sb,wttl

fl,tl,cart

fl,tl fl,tl fl,tl,wttl

tl tl fl,tl fl,tl tl,fl tl,fl fl,tl cart sb sb sb sb sb sackpaper

PRODUCTIOnPRODUCTIOn kTonnes 434 105 394 658 60 316 395 75 470 202 70 60 248 207 568 203 218 138 245 57 73 92 106 147 5,541

EnERGy Electricity Co&SelfGeneration GWh 155 58 322(1) 339 - 67 91 - 172 108 - - 59(1) 34 117 65 82(1) 61 76 16 - 12 29 110 1,974

Hydropower GWh 0.1 - - - 2.0 0.2 - - - - - - 1.5 - - - - 1.7 - - - - - - 5.5

NetGridsupply GWh 141 80 - 249 22 31 72 23 20 -(2) 30 21 60 41 35 0.3 8.8 -(2) 10 -(2) 14 13 -(2) 81 954

Totalelectricity GWh 296 139 322 588 24 98 163 23 192 108 30 21 120 75 152 66 91 63 87 16 14 24 29 192 2,933

Fuel usage

Biofuels TJ 3,687 1,989 7,819 9,987 17 40 67 - 256 - - 15 124 12 140 50 - - - - - - - 2,733 26,935

fossilfuels TJ 1,106 441 449 303 319 1,567 2,218 344 3,243 1,488 368 286 1,475 1,149 2,849 1,376 2,081 1,055 1,571 359 310 344 605 121 25,430

Totalfuels TJ 4,793(3) 2,429 8,269 10,290(3) 336 1,607 2,285 344 3,499 1,488 368 301 1,599 1,161 2,990 1,426 2,081 1,055(3) 1,571(3) 359 310 344 605 2,854 52,364

WATER WITHDRAWAl

Surface mm3 13 5.2 8.4 34 0.4 0.4 - - 2.0 1.6 0.7 - 1.9 1.5 2.2 - 1.2 1.5 3.4 0.0 0.3 0.3 0.4 2.6 80

Ground mm3 - - 0.9 - - 0.8 2.1 0.3 0.4 - - 0.5 - - - 0.9 0.3 - 0.0 0.2 - 0.2 - - 6.6

Grid mm3 0.05 0.01 0.02 0.10 - - 0.2 - 0.01 0.1 - 0.01 0.01 - 0.1 0.1 0.02 0.03 0.01 0.01 0.01 0.1 0.1 0.02 1.0

Totalwater(4) mm3 13 5.2 9.3 34 0.4 1.2 2.3 0.3 2.4 1.7 0.7 0.5 1.9 1.5 2.3 1.0 1.5 1.5 3.5 0.2 0.3 0.6 0.4 2.6 88

DISCHARGES

To air

CO2fossildirect kTonnes 63 28 27 26 18 88 124 19 261 84 21 16 84 64 161 78 117 59 88 20 18 20 34 7.8 1,528

CO2fossilindirect kTonnes 23 24 - 11 11 13 31 10 8.8 - 2.7 1.9 5.4 16 13 0.6 4.0 - 4.5 - 5.2 4.7 - 24 215

CO2biogenic kTonnes 396 221 900 1,191 1.3 3.5 5.6 - 22 4.7 1.0 1.2 18 0.9 11 4.6 4.6 - - - - - 0.6 338 3,124

Dust Tonnes 54 20 49 277 0.15 - 0.4 - 0.4 0.2 0.3 0.8 - - - - - - 0.45 - - - - 41 443

noxasNO2 Tonnes 234 109 603 785 10 50 95 6.4 262 381 17 28 86 77 130 128 374 32 72 21 6.0 16 40 174 3,735

soxasNO2 Tonnes 25 28 132 91 5.3 0.2 1.4 0.3 73 12 11 5.3 1.5 0.5 27 1.7 70 0.5 11 0.05 0.03 0.1 2.3 91 590

To water

Processwater mm3 5.3 2.8 8.8 13 0.3 0.4 1.7 0.3 - 1.4 0.6 0.4 1.6 1.2 1.7 0.6 1.2 1.3 1.3 0.2 0.2 0.1 0.3 1.9 47

Coolingwater mm3 7.1 2.2 - 21 - 0.4 0.02 - 1.3 - - - - - - - - 0.1 1.9 - - 0.3 - - 34

COD Tonnes 7,076 321 4,293 2,151 39 97 334 N/A - 229 74 48 954 125 316 1,026 161 161 175 25 35 868 51 795 19,355bod Tonnes 4,273 60 1,182 294 2.4 4.5 17 N/A - 18 10 5.1 252 9.1 10 460 7.3 10 13 0.7 1.6 379 2.2 189 7,200TotalSuspendedSolids Tonnes 457 75 593 572 4.1 2.6 - N/A - 90 17 6.4 398 22 24 916 40 12 22 4.1 4.7 22 4.9 71 3,358TotalN Tonnes 41 10 88 66 6.3 0.3 19 N/A - 43 2.7 2.6 87 23 31 23 4.4 0.8 1.8 1.1 2.0 3.8 1.7 9.5 468TotalP Tonnes 3.4 0.6 11 16 0.3 0.2 1.2 N/A - 2.7 3.3 0.5 15 1.8 3.0 11 0.3 0.1 0.3 0.1 0.3 0.2 0.2 0.8 72Solid wastes

Totalnon-hazardouswastes Tonnes 23,618 18,837 33,012 40,002 7,523 18,167 30,114 7,694 24,144 31,994 4,083 5,215 23,312 22,225 37,761 23,400 35,297 12,258 19,091 5,470 2,095 4,950 7,535 82,501 520,297

Landfill Tonnes 3,288 1,123 11,611 5,863 3,743 89 - - 11,821 31,857 4,079 1,532 20,279 12,274 602 21,909 26,686 - 79 - - - - 78,291 235,125

Recovery Tonnes 20,097 17,714 21,384 34,139 3,780 18,078 30,114 7,693 1,416 137 4.2 3,683 3,033 9,952 37,071 1,491 8,611 311 19,012 5,470 2,095 4,950 7,407 4,169 261,809

Other Tonnes 233 - 18 - - - - 0.2 10,907 - - - - - 89 - - 11,947 - - - - 128 41 23,363

Hazardouswastes Tonnes 136 31 5,294 235 1.5 80 90 2.4 42 15 4.7 7.2 6.8 9.0 21 37 64 231 14 8.3 3.3 20 10 65 6,429

bkl :brownkraftliner mg:machineglazed wtkl:whitetopkraftliner (1)CHPisoutsourced N/A:notavailable cart:cartonboard sb :solidboard wttl:whitetoptestliner (2)netelectricityexportedbyCHP fl :recycledflute tl :testliner water emissions in grey italics: external waste water treatment (3)partofheatexported (4)Totalwaterincludesrainwaterandwastewaterfromanotherorganisation Individual cell entries have been rounded. The figures in the total column may not tally due to rounding differences.


EuROPEAN OPERATiONS 2012

papeR & boaRd

mills

INTEGRATEDCORRUGATEDopeRations

otHeR PACKAGING

opeRations

otHeR opeRations

TOTAl OPERATIOnS

PRODUCTIOn

kTonnes 5,541 4,234 586 1,924

EnERGy

Electricity Co&SelfGeneration GWh 1,974 15 - - 1,988

Hydropower GWh 5.5 - - - 5.5

NetGridsupply GWh 954 489 81 2.8 1,526

Totalelectricity GWh 2,933 503 81 2.8 3,520

Fuel usage Biofuels TJ 26,935 138 - - 27,073

fossilfuels TJ 25,430 4,137 201 83 29,851

Totalfuels TJ 52,364 4,275 201 83 56,923

WATER WITHDRAWAl

Surface mm3 80 - 80

Ground mm3 6.6 0.4 0.01 7.0

Grid mm3 1.0 1.3 0.1 - 2.4

Totalwater(2) mm3 88 1.7 0.1 - 90

DISCHARGES

To air CO2fossildirect ktonnes 1,528 239 12 6.1 1,785

CO2fossilindirect ktonnes 215 151 27 1.2 394

CO2biogenic ktonnes 3,124 15 - - 3,139

Dust tonnes 443 4.5 0.2 0.01 448

noxasNO2 tonnes 3,735 95 3.9 4.1 3,837

soxasSO2 tonnes 590 53 2.8 3.8 649

To water Processwater mm3 47 0.6 0.1 - 47

Coolingwater mm3 34 0.1 - - 34

COD(1) tonnes 19,355 1,806 N/A N/A 21,160

bod(1) tonnes 7,200 397 N/A N/A 7,597

TotalSuspendedSolids(1) tonnes 3,358 350 N/A N/A 3,708

TotalN(1) tonnes 468 15 N/A N/A 483

TotalP(1) tonnes 72 0.6 N/A N/A 72

Solid wastes Totalnon-hazardouswastes tonnes 520,297 31,347 7,467 9,982 569,093

Landfill tonnes 235,125 9,912 1,336 1,885 248,258

Recovery tonnes 261,809 16,683 5,698 8,009 292,199

Other tonnes 23,363 4,753 433 88 28,636

Hazardouswastes tonnes 6,429 3,310 592 1.0 10,333

N/A:notavailable (1)sumofavailabledata(formillsdetailsarereportedintheindividualtables)(2)Totalwaterincludesrainwaterandwastewaterfromanotherorganisation.

Individual cell entries have been rounded. The figures in the total column may not tally due to rounding differences.


lATiN AMERiCAN MillS 2012 ENViRONMENTAl dATA

Bernal,AR

Coronel

Suarez,AR

Cali,CO

Barranquilla,

CO Barbosa,CO

LosReyes,Mx

CerroGordo,

Mx

Monterrey,M

x

Caracas,VE

Valencia,VE

Sanfelipe,VE

Tota

l mil

ls

fl,tl fl,tl P&W,Sack

paper,cart,

virginpulp,tl,bkl,scfl,wttl,wtkl

tl,fl fl,wttl fl,cart,

tl,wttl

tl,cart,fl

fl,tl tl,cart,wttl

cart tl,scfl,fl

PRODUCTIOn

kTonnes 69 48 263 62 73 75 284 40 16 36 98 1,064

EnERGy

Electricity

Co&SelfGeneration GWh - - 242 31 - - - - 4.4 35 104 416

Hydropower GWh - - - - - - - - - - - -

NetGridsupply GWh 34 19 95 2.1 40 50 162 21 5.7 10 3.1 442

Totalelectricity GWh 34 19 337 33 40 50 162 21 10 46 107 858

Fuel usage

Biofuels TJ - - 4,422 - - - - - - - 441 4,864

fossilfuels TJ 470 230 5,605 920 384 535 1,172 202 209 1,084 2,995 13,804

Totalfuels TJ 470(1) 230 10,027 920 384 535 1,172(1) 202 209(1) 1,084 3,436 18,668

WATER WITHDRAWAl

Surface mm3 0.8 - 21 1.1 0.6 - 0.5 - - 24

Ground mm3 0.3 0.1 0.2 1.6 0.1 1.0 5.3 8.5

Grid mm3 - - - 0.01 - - - 0.04 0.3 0.1 - 0.5

Totalwater(2) mm3 0.8 0.3 24 1.1 0.6 0.3 1.6 0.1 0.8 1.1 5.3 36

DISCHARGES

To air

CO2fossildirect kTonnes 27 13 448 52 31 30 66 11 13 62 172 924

CO2fossilindirect kTonnes 12 6.7 17 0.4 7 23 74 10 1.1 2.1 0.6 152

CO2biogenic kTonnes 0.4 - 430 - - - - - - - 53 483

Dust Tonnes - - 187 8.9 0.9 0.7 1.9 - - 0.06 15 215

noxasNO2 Tonnes 15 13 248 72 22 30 51 4.8 47 92 230 825

soxasSO2 Tonnes 2.0 0.3 2,582 1.3 109 0.05 0.6 0.02 1.0 17 6.0 2,718

To water

Processwater mm3 0.7 0.2 24 1.0 0.3 0.2 0.7 0.06 0.8 0.6 3.5 32

Coolingwater mm3 - - - - - - - - - - - -

COD Tonnes 272 53 7,197 2,058 1,541 32 165 59 1,246 170 1,610 14,404

bod Tonnes 117 8.5 1,276 1,027 606 2.3 8.1 15 589 32 145 3,825

TotalSuspendedSolids Tonnes 59 5.8 2,168 657 95 2.4 21 19 724 50 228 4,029

TotalN Tonnes 4.8 1.6 166 11 3.7 1.0 4.2 3.1 12 3.2 15 226

TotalP Tonnes 0.5 0.1 11 0.2 0.2 0.4 2.5 0.2 1.3 0.4 1.5 18

Solid wastes

Totalnon-hazardouswastes Tonnes 6,462 6,272 218,615 2,690 6,926 1,998 44,417 6,271 853 9,103 38,124 341,732

Landfill Tonnes 6,348 6,272 216,694 2,616 5,398 1,888 19,162 5,966 816 8,943 37,987 312,091

Recovery Tonnes 112 - 1,406 72 1,521 111 25,255 305 37 159 137 29,116

Other Tonnes 1.9 - 515 1.5 6.7 - - - - - - 525

Hazardouswastes Tonnes 12 4.4 208 19 6.5 8.3 39 6.6 1.3 15 985 1,304

bkl :brownkraftliner P&W:printingandwritinggrade virginpulp:virginpulpsoldexternally cart:cartonboard scfl :semi-chemicalflute wtkl :whitetopkraftliner fl :recycledflute tl :testliner wttl :whitetoptestliner


(1)partofheatexported(2)Totalwaterincludesrainwaterandwastewaterfromanotherorganisation.


lATiN AMERiCAN OPERATiONS 2012

papeR & boaRd mills

otHeR opeRations

TOTAl OPERATIOnS

PRODUCTIOn

kTonnes 1,064 2,434

EnERGy

Electricity

Co&SelfGeneration GWh 416 - 416

Hydropower GWh - - -

NetGridsupply GWh 442 113 554

Totalelectricity GWh 858 113 971

Fuel usage

Biofuels TJ 4,864 - 4,864

fossilfuels TJ 13,804 1,028 14,832

Totalfuels TJ 18,668 1,028 19,696

WATER WITHDRAWAl

Surface mm3 24 0.05 24

Ground mm3 8.5 0.3 8.8

Grid mm3 0.5 0.2 0.7

Totalwater(1) mm3 36 0.6 36

DISCHARGES

To air

CO2fossildirect ktonnes 924 64 988

CO2fossilindirect ktonnes 152 38 191

CO2biogenic ktonnes 483 - 483

Dust tonnes 215 1.8 217

noxasNO2 tonnes 825 26 851

soxasSO2 tonnes 2,718 27 2,745

To water

Processwater mm3 32 0.1 32

Coolingwater mm3 - 0.01 0.01

COD tonnes 14,404 100 14,504

bod tonnes 3,825 51 3,876

TotalSuspendedSolids tonnes 4,029 15 4,044

TotalN tonnes 226 2.4 228

TotalP tonnes 18 0.4 19

Solid wastes

Totalnon-hazardouswastes tonnes 341,732 8,258 349,991

Landfill tonnes 312,091 4,997 317,088

Recovery tonnes 29,116 1,397 30,513

Other tonnes 525 1,865 2,390

Hazardouswastes tonnes 1,304 1,176 2,480


(1)Totalwaterincludesrainwaterandwastewaterfromanotherorganisation.


TOTAl GROuP OPERATiONS

All operations

2012 2011 2010 2009

EnERGy

Electricity Co&SelfGeneration GWh 2,405 2,401 2,250 2,169

Hydropower GWh 5.5 5.5 8.3 11

NetGridsupply GWh 2,081 2,049 2,321 2,446

Totalelectricity GWh 4,491 4,456 4,580 4,626

Fuel usage Biofuels TJ 31,936 33,102 32,769 29,391

fossilfuels TJ 44,683 46,046 46,628 47,134

Totalfuels TJ 76,619 79,149 79,397 76,525

WATER WITHDRAWAl

Surface mm3 104 103 109 121

Ground mm3 16 15 15 16

Grid mm3 3.1 3.0 3.2 3.8

Totalwater(3) mm3 126 122 127 141

DISCHARGES

To air CO2fossildirect kTonnes 2,773 2,851 2,861 2,917

CO2fossilindirect kTonnes 584 568 658 658

CO2biogenic kTonnes 3,622 3,606 3,517 3,100

Dust Tonnes 665 699 772 1,004

noxasNO2 Tonnes 4,688 4,767 5,595 6,566

soxasSO2 Tonnes 3,395 3,893 3,691 3,832

To water Processwater mm3 79 78 82 96

Coolingwater mm3 34 32 33 32

COD(1) Tonnes 35,665 36,278 35,024 38,961

bod(1)(2) Tonnes 11,473 11,638 11,404 11,875

TotalSuspendedSolids(1) Tonnes 7,752 8,504 8,033 8,384

TotalN(1) Tonnes 711 643 653 420

TotalP(1) Tonnes 91 97 109 86

Solid wastes Totalnon-hazardouswastes Tonnes 919,084 906,389 888,775 918,692

Landfill Tonnes 565,345 525,854 453,239 453,498

Recovery Tonnes 322,712 329,880 377,493 337,529

Other Tonnes 31,026 50,655 58,043 127,666

Hazardouswastes Tonnes 12,813 10,717 12,448 10,289

(1)sumofavailabledata(formillsdetailsarereportedintheindividualtables)(2)NettingsdorferBOD’svaluesfromyears2011,2010and2009havebeenadjusted,withtheaccurateratio

COD/BODmeasuredin2012.(3)Totalwaterincludesrainwaterandwastewaterfromanotherorganisation.


MANAGEMENT SySTEMS CERTifiCATiON

fORESTRy forestManagement

wOOd SOuRCiNG ChainofCustodylatin America Europe

CO Colombiaforest FSC® es Centralforestal PEFC & FSCve Venezuelaforest FR ComptoirDuPinAquitaine PEFC & FSC

ExTERNAl PAPER SOuRCiNG ChainofCustodyEurope

EuropeanPaperSourcing(EPS) PEFC & FSC

EuROPEAN MillS

Virgin mills

QualityManagement

System

EnvironmentalManagement

System

HealthandSafetySystem

ChainofCustody

ISO 9001 ISO 14001 OHSAS 18001

at Nettingsdorfer • • PEFC & FSCes Navarra • • PEFC & FSC

Nervión • • PEFC & FSCFR CelluloseduPin • • • PEFC & FSCse Piteå • • PEFC & FSCRecycled millsCZ Morava • • • PEFC & FSCde BadenKarton • • • PEFC & FSC

CDHaupt • • • PEFC & FSC Herzberger • • • FSCHoya • • • PEFC & FSC Viersen • • • PEFC & FSC Zülpich • • • PEFC & FSC

es Mengibar • • PEFC & FSC FR Alfad’Avignon • • PEFC & FSC

Rethel • • PEFC & FSC Saillat • • • PEFC & FSC

it Ania • • PEFC & FSC nl sbmCoevorden • • • PEFC & FSC

sbmHoogkerk • • • PEFC & FSC sbmNieuweschans • • • PEFC & FSC sbmOudePekela • • • PEFC & FSC Roermond • • • PEFC & FSC

UK SSK • • • PEFC & FSC TownsendHook • • • PEFC & FSC

lATiN AMERiCAN MillSVirgin millsCO Cali • FSCve SanfelipeRecycled millsaR Bernal

CoronelSuarezCO Barbosa • FSC

Barranquilla • FSCMx CerroGordo • • FSC

LosReyes • • FSCMonterrey • • FSC

ve CaracasValencia feb2013


ABOuT THE REPORT

TheinformationinthisreportcoversalltheinternationalactivitiesoftheSmurfitKappaGroupforthecalendaryear2012andalsoincludessomeinformationforearly2013whenmentionedspecifically.Dataincludedarefortheyear2012only.

ThereportdescribesSmurfitKappa’svisionandactivitiesonsustainabilityintheenvironmental,economicandsocialareas.

Attheendof2012ouroperationsincluded348facilitiesin32countriesinEuropeandtheAmericas.Thisincludesasmallnumberofjointventuresandminorityholdings,noneofwhichismaterial.InformationfromallthoseoperationsisincludedinthisreportexceptforSmurfitKappaOrangeCounty(seebelow).forthiscompanydataareonlyincludedwhenspecificallymentionedintherelevantsectionofthereport.

Acquisitions and divestitures 2012InJanuary2012SmurfitKappaacquiredBaguin,abag-in-boxpackagingsolutionscompanyinBuenos Aires,Argentina.for2012,onlyenvironmentaldataofthiscompanyareincludedinthisreport.InDecember2012,weacquiredOrangeCountyContainerGroup, acorrugatedandcontainerboardmanufacturerwithoperationsinnorthernMexicoandthesouthernUnitedStates.ThiscompanywasthenrenamedSmurfitKappaOrangeCounty(“SKOC”).Therewerenodivestitures in2012.Apartfromtheacquisitionsmentioned,nosignificantchangesinthescope,boundaryandmeasurementmethodswereappliedtothereportcomparedtopreviousyears.

Topics, issues and targetsSmurfitKappafullyrecognisesthatsustainabledevelopmentembracessocialandbusinesssubjects aswellasenvironmentaltopics.Thesesubjectsandtopicshavebeenselectedonthebasisofinputfrom thevariousstakeholdergroups.SmurfitKappacollecteddatafromallitsmanufacturingoperationsthatwereoperationalattheendof2012withexceptionoftheSKOCasmentionedabove.

Whenquantifiedperformanceortargetsarementionedinthisreport,theyarerelatedtoproductionlevels. Otherinformationisreportedinabsolutefigures, unlessotherwisestated.

Reporting guidelines, data collectionAmongthevariousreferencesusedforthedevelopmentandidentificationofbaselinedataincludedinthisreportaretheG3.1SustainabilityReportingGuidelinesissuedbytheGlobalReportingInitiative(GRI),anindependentinstitutionwhosemissionistoprovideatrustedandcredibleframeworkforsustainabilityreporting.SmurfitKappaappliedtheGRIatanA+level.

Everyefforthasbeenmadetoprovidedatathatisasaccurateaspossible.DatarelatingtoenvironmentalmattersaregatheredthroughaGroup-wideITbased

reportingsystemimplementedinalloperationsofSmurfitKappa.

ThistoolisintegratedintotheGroup’sintranet,enablingsitestoreporttheirenvironmentaldataonlineaccordingtotheGRIguidelines.Astheinformationisstoredcentrally,thisallowsforeasierandfasterprocessing.

Wemakecontinuousefforttointroducenewfunctionalitytoallowtheindividualoperationstocomparetheirperformancewiththepreviousreportingperiods,toextractdataforfurtherandindividualprocessingoftheirowndata,andtoalertthemwheresignificantdeviationoccurs.Reportingprocedureshavebeenrevisedandfurtherstrengthenedduring2012.

In2012,wedevelopedspecificprotocolsforreportingenergyandairemissionsdataforcertainpaperand boardmills.Ourintentionistodevelopsuchprotocols forallotherpaperandboardmillsinthenexttwoyears.Intentionistodevelopprotocolsnotonlyforenergy databutforthereportingofallenvironmentalindicators,contributingtoourobjectivetoensurecontinuousconsistencyofreporteddataacrossourglobaloperationalsystem.

forthemostpart,dataisbasedonmeasuredor meteredquantities,oronbestestimatesbasedonindustryknowledgeandestablishedcalculation factors.CO2 emissioncalculationshavebeenbased onestablishedfuelconsumptionandspecificCO2 emissionfactors.Definitionsandcalculationsfortheperformanceindicatorscanbefoundintheglossary onpages94to96.

Wearemakingon-goingeffortstofurtherstandardisethedatagatheringsysteminSmurfitKappatoimprovedataqualityandconsistencyintheuseofGroupdefinitionsandscoperequirementsofourkeyindicators.

Werequestedanexternalassuranceprovider,KPMG,toprovidelimitedassuranceonthedataandthetextofthereport.TheassurancereportofKPMGcanbefoundonpage93.


RelationsHip to GRIGUIDELINES

GRI-G3.1 DESCRIPTION level oF REPORTING

SOURCE/COMMENT PAGE(S)

Profile

1.1 CEOStatementonrelevanceofsustainabilitytotheorganisationanditsstrategy

full sdR 6-7

1.2 Descriptionofkeyimpacts,risksandopportunities full sdR 17-19

Organisational Profile

2.1 Nameoftheorganisation full sdR Cover

2.2 Primarybrands,products,and/orservices full aR 3-5

2.3 Operationalstructureoftheorganisation full Website

2.4 Locationoforganisation’sheadquarters full sdR Insidebackcover

2.5 Countrieswheretheorganisationoperates full aR 3-5

2.6 Natureofownershipandlegalform full aR 114-115,117

2.7 Marketsserved full Website

2.8 Scaleofthereportingorganisation full aR 2-5

2.9 Significantchangesduringthereportingperiodinsize,structureandownership

full aR 113-114

2.10 Awardsreceivedinthereportingperiod full Website

Report Parameters

3.1 Reportingperiod(e.g.fiscal/calendaryear)forinformationprovided

full sdR 85

3.2 Dateofmostrecentpreviousreport(ifany) full sdR 6

3.3 Reportingcycle(annual,biennial,etc.) full sdR 6

3.4 Contactpointforquestionsregardingthereportoritscontents full sdR Insidebackcover

3.5 Processfordefiningreportcontent full sdR 85

3.6 Boundaryofthereport full sdR aR

85 3-5

3.7 Anyspecificlimitationsonthescopeorboundaryofthereport full sdR 85

3.8 Basisforreportingonjointventures,subsidiaries,etc. full sdR 85

3.9 Datameasurementtechniquesandthebasesofcalculations full sdR 34,85

3.10 Explanationofeffectofre-statementsofinformationprovidedpreviously

full sdR 83

3.11 Significantchangesinscope,boundary,ormeasurementmethods

full sdR 83

TheGlobalReportingInitiative(GRI)isalargeworldwidenetworkofexpertswhosemissionistoprovideglobalstandardsforsustainabilityreporting.

TheGRInetworkhasdevelopedaSustainabilityReportingframework,thecoreofwhichistheSustainabilityReportingGuidelines.TheGuidelinesconsistofprinciplesfordefiningreportcontentandensuringthequalityofreportedinformationaswellasstandarddisclosurescomprisingperformanceindicatorsandotherdisclosureitems.Theseguidelinesprovideaninternationallyrecognisedframeworkforvoluntaryreportingonanorganisation’seconomic,environmentalandsocialperformance.

TheindexbelowhasbeenpreparedusingthecurrentGRISustainabilityReportingGuidelines(versionG3.1)anditprovidesalistoftheGRIindicatorsreportedbySmurfitKappafor2012.AllcoreIndicatorshavebeenaddressedandareincludedinthetable.Theindexreferstoinformationinour2012SustainableDevelopment Report(SDR),our2012AnnualReport(AR),ourwebsite:www.smurfitkappa.comandtheCarbonDisclosureProjectwebsite.

Wedeclarethatour2012reportingappliestoaGRI“A+”applicationlevel.An“A”applicationlevelrequiresreportingonaspecifiedrangeofcriteria,onthemanagementapproachtodisclosuresforeachindicatorcategoryandaresponseoneachcoreG3.1indicator. Wehavesoughtassurancefromanexternalpartywhichexpandstheapplicationlevelto“A+”.




3.12 TableidentifyingthelocationoftheStandardDisclosuresinthereport

full sdR 86-90

3.13 Policyandcurrentpracticeonseekingexternalassuranceforthereport

full sdR 86,93

Governance, Commitments, and Engagement

4.1 Governancestructureoftheorganisation full aR 38-44

4.2 IndicateifChairoftheBoardisalsoanexecutiveofficer full aR 40

4.3 TheBoardmembersthatareindependentand/ornon-executivemembers

full aR 38

4.4 WaysforshareholdersandemployeestoproviderecommendationsordirectiontotheBoard

full sdR aR

57 43

4.5 LinkbetweencompensationofBoardandmanagementwithSDRperformance

full aR 47

4.6 ProcessesinplacefortheBoardtoensureconflictsofinterestareavoided

full Website

4.7 ProcessfordeterminingthequalificationsandexpertiseoftheBoard

full aR 39

4.8 Internallydevelopedstatementsofmissionorvalues,codesofconduct,andprinciples

full sdR aR Website

8-9 13,38-43

4.9 ProceduresoftheBoardforoverseeingidentificationandmanagementofperformance

full aR 40

4.10 ProcessesforevaluatingtheBoard’sownSDRperformance full sdR aR

8 40

4.11 Explanationofwhetherandhowtheprecautionaryapproachorprincipleisaddressedbytheorganisation

full aR 43

4.12 Externallydevelopedeconomic,environmentalandsocialcharters&principles

full sdR 8

4.13 Membershipsinassociations full sdR 10-11

4.14 Listofstakeholdergroupsengagedbytheorganisation full sdR 11

4.15 Basisforidentificationandselectionofstakeholderswithwhomtoengage

full sdR 6,10,12

4.16 Approachestostakeholderengagement full sdR 10-12,16

4.17 Keytopicsandconcernsraisedthroughstakeholderengagement

full sdR 10-12

Economic Indicators

Disclosureonmanagementapproach full sdR aR

6,10-12 13,30-33,64-73

EC1 Directeconomicvaluegeneratedanddistributed full aR 74-76

EC2 financialimplicationsandotherrisksandopportunitiesfortheorganisation’sactivitiesduetoclimatechange

full CDP2012Investor Section5

EC3 Coverageoftheorganisation’sdefinedbenefitplanobligations full aR 70,72,93-97

EC4 Significantfinancialassistancereceivedfromgovernment full aR 58,69

EC6 Policy,practicesandproportionofspendingonlocally-basedsuppliersatsignificantlocationsofoperation

full sdR 11,70

EC7 Proceduresforlocalhiringandproportionofseniormanagementhiredfromthelocalcommunityatsignificantlocationsofoperation.

full sdR 53

EC8 Developmentandinfrastructureprovidedprimarilyforpublicbenefit

full SDR 59-64 Otherthanlocalcommunityinvolvement, noengagementbySmurfitKappa

Environmental Indicators

Disclosureonmanagementapproach full sdR 8,15-16,85

En1 Materialsusedbyweightorvolume full sdR 76-77

En2 Percentageofmaterialsusedthatarerecycledinputmaterials full sdR 28

En3 Directenergyconsumptionbyprimaryenergysource full sdR 34-35,76-83

En4 Indirectenergyconsumptionbyprimarysource full sdR 35,76-83

En5 Energysavedduetoconservationandefficiencyimprovements full sdR 34,38

En6 Energy-efficientorrenewableenergyproductsandservices full sdR 33-36,38

En8 Totalwaterwithdrawalbysource full sdR 41,76-83

En10 Percentageandtotalvolumeofwaterrecycledandreused full sdR 40,76-83




En11 Locationandsizeoflandbyprotectedareasandareasofhighbiodiversityvalue

full sdR Website

29-30

En12 Descriptionofsignificantimpactsofactivities,productsandservicesonbiodiversity

full sdR 30-33

En16 Totaldirectandindirectgreenhousegasemissionsbyweight full sdR 35,76-83

En17 Otherrelevantindirectgreenhousegasemissionsbyweight full sdR 40,76-83

En18 Initiativestoreducegreenhousegasemissionsandreductionsachieved

full sdR 36

En19 Emissionsofozone-depletingsubstancesbyweight full Wedonotaddanyozone-depletingsubstances(ODS),thathavebeenregulatedfollowingtheMontrealProtocol,toourproductsduringourmanufacturingprocesses.Consequently,ourproductsdonotemitanyODSduringtheirlifecycle.

En20 nox,SOxandothersignificantairemissionsbytypeandweight full sdR 76-83

En21 Totalwaterdischargebyqualityanddestination full sdR 40-42,76-83

En22 Totalweightofwastebytypeanddisposalmethod full sdR 76-83

En23 Totalnumberandvolumeofsignificantspills full SDR Onesignificantspilloccurredat 41 CelluloseduPin

En26 Initiativestomitigateenvironmentalimpactsofproductsandservices,andextentofimpactmitigation

full sdR 15-16,26-43

En27 Percentageofproductssoldandtheirpackagingmaterialsthatarereclaimedbycategory

full sdR 26

En28 Significantfinesandnon-monetarysanctionsfor non-compliancewithenvironmentallaw

full sdR 9

En29 Significantenvironmentalimpactfromtransport full sdR 40

labour Practice Indicators

Disclosureonmanagementapproach full sdR 12,44-58

lA1 Totalworkforcebyemploymenttypeandregion full sdR 52-54

lA2 Totalnumberandrateofemployeeturnoverbyagegroup,gender,andregion

full sdR 54

lA3 Benefitsprovidedtofull-timeemployees full sdR 52

lA4 Percentageofemployeescoveredbycollectivebargainingagreements

full sdR 52

lA5 Minimumnoticeperiod(s)regardingsignificantoperationalchanges

full sdR 57

lA7 Ratesofinjury,occupationaldiseases,lostdaysandabsenteeism,andnumberofwork-relatedfatalitiesbyregion

full sdR 47-48

lA8 Education,training,counselling,preventionandrisk-controlprogrammesinplacetoassistworkforcemembers,theirfamiliesorcommunitymembersregardingseriousdiseases

full sdR 46

lA10 Averagehoursoftrainingperyearperemployeebyemployeecategory

full sdR 54

lA11 Programmesforskillsmanagementandlifelonglearning full sdR 54-57

lA12 Employeesreceivingperformanceandcareerdevelopmentreviews

full sdR 55

lA13 Compositionofgovernancebodiesandbreakdownofemployeespercategoryaccordingtogender,agegroup,minoritygroupmembership,andotherindicatorsofdiversity

full aR sdR

38-39 52-54

lA14 Ratioofbasicsalaryofmentowomenbyemployeecategory full sdR Samejob,samepay

52

lA15 Returntoworkandretentionratesafterparentalleave,bygender(partialreporting)

Partial SDR 53

Detailedinformationnotcurrentlyavailable

Human Rights Indicators

Disclosureonmanagementapproach full sdR 12,52

HR1 Percentageandtotalnumberofsignificantinvestmentagreementsthatincludehumanrightsclausesorthathaveundergonehumanrightsscreening

full sdR 57-58




HR2 Percentageofsignificantsuppliersandcontractorsthathaveundergonescreeningonhumanrightsandactionstaken

full SDR 58

Noformalassessmentsinplace.OurCodeofBusinessConductprovidestheprinciplestooperateforallouroperationsglobally.OurCodeofBusinessConductisbasedoninternationalconventionsandcodessuchasTheUNDeclarationoffundamentalHumanRightsandtheILODeclarationonfundamentalPrinciplesandRightsatwork(coreconventions).Approximately15%ofourproductionvolumeoriginatesfromcountriesconsideredhighorextremerisk(accordingtotheMaplecroftHumanRightsRiskIndex2013).Alsoforcountrieswithhighorextremerisk,ourCodeofBusinessConductisbasisfordoingbusiness.Therefore,weconsidertheriskthatouroperationsinthoseandothercountriesviolatehumanrightsaslow.

HR3 Totalhourstrainingonpoliciesandproceduresconcerninghumanrights

Notreported Wehavenosuchtrainingprogrammes.

EmployeesaremadeawareofrelevantpoliciesthroughawarenessprogrammesregardingCodeofBusinessConduct.

HR4 Totalnumberofincidentsofdiscriminationandactionstaken full sdR Website

52

HR5 Operationsandsignificantsuppliersidentifiedinwhichtherighttoexercisefreedomofassociationandcollectivebargainingmaybeatsignificantrisk,andactionstakentosupporttheserights

full sdR 52

HR6 Operationswithsignificantriskforincidentsofchildlabour,andmeasurestakentoeliminate

full sdR 52

HR7 Operationswithsignificantriskofforcedorcompulsorylabour,andmeasurestoeliminate

full sdR 52

HR8 Percentageofsecuritypersonneltrainedintheorganisation’spoliciesorproceduresconcerningaspectsofhumanrightsthatarerelevanttooperations

Notreported Notapplicable

HR9 Incidentsofviolationsinvolvingrightsofindigenouspeopleandactionstaken

full seecommentunderHR2

HR10 Percentageandnumberofoperationssubjecttohumanrightsreviews

full seecommentunderHR2

HR11 Numberofgrievancesrelatedtohumanrightsaddressedandresolved

full NosuchgrievanceswerereportedtoGroupandtherewerenosuchreportstolocaloperationseither.

Social


SO1 Percentageofoperationswithimplementedlocalcommunityengagement,impactassessments,anddevelopmentprogrammes.

Partial sdR 59-65

SO2 Percentageandtotalnumberofbusinessunitsanalysedforrisksrelatedtocorruption

Partial sdR 8-9

SO3 Percentageofemployeestrainedinorganisation’santi-corruptionpoliciesandprocedures

full sdR 8-9

SO4 Actionstakeninresponsetoincidentsofcorruption full sdR 8-9

SO5 Publicpolicypositionsandparticipationinpublicpolicydevelopmentandlobbying

full sdR 8-9

SO6 Totalvalueoffinancialandin-kindcontributionstopoliticalparties,politiciansandrelatedinstitutionsbycountry

full sdR 8-9

SO7 Totalnumberoflegalactionsforanti-competitivebehaviour,anti-trustandmonopolypracticesandtheiroutcomes

full sdR 8-9

SO8 Monetaryvalueofsignificantfinesandtotalnumberofnon-monetarysanctionsfornon-compliancewithlawsandregulations

full sdR 8-9




SO9 Operationswithsignificantpotentialoractualnegativeimpactonlocalcommunities

full Ingeneral,werecognisethatouroperationsareofeconomicsignificanceforthelocalcommunitiesinwhichtheyarelocated.Itisourpolicytobeactivelyinvolvedsociallyinourhostcommunities.Environmentally,ourpaperandboardmillsmaypose ariskofeffluentleakageswhich,iftheyoccur,maytemporarilyaffectlocalwaterstreamswithincreasedCOD/BODorTSSlevels.Ouroperationsdonotposeasignificantriskofemissionstoairofsubstancesthatmayaffecthumanhealth.Ouroperationsdonotpose arisktotheirhostcommunitiesregardingtheuseofnaturalresourceswiththepossibleexceptionofthoseareaswherewaterisscarce.

SO10 Preventionandmitigationmeasuresinoperationswithsignificantpotentialoractualnegativeimpactonlocalcommunities

full Ingeneral,bycomplyingwithlocalandinternationallaws,thereisnoneedforfurtherpreventionand/ormitigationmeasureswithregardtopotentialenvironmentalrisksthatcouldpossiblyimpacthostcommunities.

forthehandlingofthenegativeenvironmentalimpactoftheblackliquorspillageinfactureseepage41.

Inthosecaseswherealocaloperationdiscontinuesitsoperations,anynegativeeconomiceffectsonitshostcommunityaremitigatedbyactionsdescribedonpages80and81.

Product Responsibility Indicators


PR1 Lifecyclestagesinwhichhealthandsafetyimpactsofproductsandservicesareassessedforimprovement,andpercentageofsignificantproductsandservicescategoriessubjecttosuchprocedures

full sdR 72

PR2 Incidentsofnon-compliancewithregulationsandvoluntarycodesonHealthandSafetyimpactsofproductsandservicesduringtheirlifecycle,bytypeofoutcomes

full sdR 72

PR3 Typeofproductandserviceinformationrequiredbyprocedures,andpercentageofsignificantproductsandservicessubjecttosuchinformationrequirements

full sdR 72

PR4 Totalnumberofincidentsofnon-compliancewithregulationsandvoluntarycodesconcerningproductandserviceinformationandlabelling,bytypeofoutcomes

full sdR 72

PR5 Practicesrelatedtocustomersatisfaction,includingresultsofsurveysthatmeasurecustomersatisfaction

full sdR 69

PR6 Programmesforadherencetolaws,standards,andvoluntarycodesrelatedtomarketingcommunications,includingadvertising,promotion,andsponsorship

full sdR 69

PR7 Totalnumberofincidentsofnon-compliancewithregulationsandvoluntarycodesonmarketingcommunications,includingadvertising,promotionandsponsorshipbytypeofoutcomes

full sdR 69

PR8 Totalnumberofsubstantiatedcomplaintsregardingbreachesofcustomerprivacyandlossesofcustomerdata

full Nosubstantiatedcomplaintsidentified

PR9 Monetaryvalueofsignificantfinesfornon-compliancewithlawsandregulationsconcerningtheprovisionanduseofproductsandservices

full Nofinesand/orsubstantiatedclaimsfornon-compliancewithlawsorregulationsconcerningtheprovisionanduseofproductsandserviceswereidentified


BuSiNESS iN THE COMMuNiTy iRElANdExTERNAl COMMENTARy – SMuRfiT kAPPA SuSTAiNABiliTy dEVElOPMENT REPORT 2012

This,thesixthsustainabilityreportpublishedby SmurfitKappa,isaveryimpressive,clearandcomprehensivereport.

Asacompanydedicatedto“thesustainablesupplyofpaper-basedpackagingsolutions”,sustainabilityisnotonlyakeybusinessdriverforSmurfitKappa,butaplatformfordifferentiationinthemarket.Throughinnovativepackagingdesignandcustomersupplychainoptimisation,SmurfitKappahasbecomeakeyenablerinensuringthedeliveryofcustomers’producttoconsumersisoptimallysustainable.

SmurfitKappaproducesboththerawmaterialforpackagingandthepackingitself.Astrongcommitment tocontinuousimprovementhasresultedinsignificantstridesbeingmadeonthecompany’sownsustainabilityjourney.

Particularlyimpressiveisthefactthat90%ofconvertingoperationsworldwideareChainofCustodycertifiedunderfSCorPEfC–achieved2yearsaheadofschedule.Theapproachtoensurecompletetraceabilityinthesupplychainandcontinuousinvestmentinsustainableforestrymanagementisevidenceofleadershipintheirsector.Inaddition,wewhollyendorsethecompany’sengagementwithsupplierstoaligntheirpoliciesandobjectivesonsustainabilitywiththoseofSmurfitKappa.

Indeed,thevalueplacedonstakeholderengagementas awholestandsoutinthisreport.PracticalexamplesareprovidedonhowSmurfitKappaengagesonanongoingbasiswithcustomers,employees,localcommunitiesandNGOs(regardingenvironmentalimpact).Inputfromallgroupsisdrawnupontoaidthecompanyrefinetheissuesmostmaterialtothecompany.

Throughthenarrativeanddetaileddatasupplied,itisevidentthattremendouseffortisbeingmadeinalloperatinglocationstoachieveabalanceofeconomic,socialandenvironmentalaspects.Wecommendthe levelofdatadisclosedonenergy,waterandwastemanagement.

Theexampleofinnovationbeingdeliveredby SmurfitKappainColombia,inpartnershipwithlocalorganisations,onbiofuel,isworthyofspecificmention.

Thesectiondetailingtherisksandchallengesregardingtheissuesoffibreavailability,therisingcostofenergy,regulationconcerningCO2emissions,waterandfoodsafety,facedbybothSmurfitKappaandthepaperpackingindustryasawholeisarticulatedwell.Eachchallengeisdealtwithcomprehensivelyandfollowingonfromthedisclosureoftheachievementsmadetodate,welookforwardtoreadinginthecomingmonths,howSmurfitKappaiscontinuinginitsriskmanagementstrategy.

ThenewCodeofBusinessConduct2012andongoingawarenessprogrammeislikelytopaydividendstoo.Safetyatworkcontinuestobeapriorityalongsidestrongpracticesinplaceonemployeemanagementanddevelopment.

Asinpreviousyears,independentassuranceis providedbyKPMGonhowSmurfitKappahasapplied theGlobalReportingInitiative’sG3.1Guidelines.Ourrecommendationsmadelastyearwerefullytakenonboardwiththeuseofgraphsand‘ataglance’illustrations.

RecommendationsThe2012reportisverycomprehensiveandperhapssomewhatrepetitiveinplaces.WesuggestthatSmurfitKappaconsidermakinggreateruseofthecorporatewebsitetofeaturethemainelementsofthereport,dividedintosectionse.g.impactofSmurfitKappaat aglance;innovativepackagingdesignforcustomers;approachtoriskmanagement;engagementwithstakeholders;objectivesandtargetsforthecomingyear.

further,whileexcellentexamplesofpackagingdesignandcustomersupplychainoptimisationareincludedinthisreport,werecommendthatadditionalemphasisisgiventotheseinthenextiteration.

Onafinalnote,theextenttowhichsustainabilityisintegratedintotheSmurfitKappabusinessstrategy,operationsandactivitiessuggeststousthatthecompanyisreadyforthechallengeofanintegratedreport-wherefinancial,social&environmentaldata,approachandimpact-isdisclosedinonedocument.AccordingtotheGRI,“the future of corporate reporting is the integration of financial and sustainability strategy and results.”

InplacingsustainabilityattheheartofSmurfitKappa’sbusinessstrategyandindrivingongoing,continuousimprovement,bothinglobaloperationsandcommunications,aleadershipopportunityisavailable totheGroupinintegratedreporting,thatwewarmlyrecommendisseizedandactedupon.

Tina Roche ChiefExecutive BusinessintheCommunityIreland


uN GlOBAl COMPACT

SmurfitKappabecameaparticipantintheUnitedNationsGlobalCompact,aworldwidecorporatecitizenshipinitiative,in2010.Thisisnowanetworkofmorethan10,000corporateparticipantsandotherstakeholdersfromover130countrieswhopromotetencoreprinciplesintheareasofhumanrights,labour,environmentandanti-corruption.Theseprinciplesarelistedinthetablebelow.

Asapartofthiscommitment,SmurfitKappawillreportontheCompany’scorporateresponsibilityactivitiesandperformanceinanannualCommunicationonProgress(COP),usingtheannualSustainableDevelopmentReportastheplatformforthiscommunication.

TheSustainableDevelopmentReportprovidesanumberofexamplesofongoingactivities,aswellasrelevantkeyperformanceindicators,whichillustrateSmurfitKappa’s

supportforthetenGlobalCompactprinciplesinitseverydaybusiness.MeasurementsofperformancerelatedtotheGlobalCompactprinciplesaregivenusingindicatorsprovidedbytheGlobalReportingInitiative(GRI),whereverfeasible.Inparticular,GRIperformanceindicatorsrelatingtohumanrights,labourandanti-corruptionprinciplesarepresentedintheSocialDevelopmentsectionwhileenvironmentalperformanceindicatorsreportedintheEnvironmentsection. AcompleteGRIindexcanbefoundonpages86to 90oftheReport.

ThefollowingtableshowshowourperformanceinrelationtoeachUNGlobalCompactprinciplecan bereportedusinganumberofGRIperformanceindicators.ThisisbasedonguidancedocumentspublishedbytheUNGlobalCompact.

UnGC principles GRI indicators

HumanRights

1 Businessesshouldsupportandrespecttheprotectionofinternationallyproclaimedhumanrights;and

HR1-11,LA5,LA7-8,13-15,PR8

2 Businessesshouldmakesurethattheyarenotcomplicitinhumanrightsabuses. HR1-11

labour

3 Businessesshouldupholdthefreedomofassociationandtheeffectiverecognitionoftherighttocollectivebargaining;

LA4-5

4 Businessesshouldupholdtheeliminationofallformsofforcedandcompulsorylabour; HR7

5 Businessesshouldupholdtheeffectiveabolitionofchildlabour;and HR6

6 Businessesshouldupholdtheeliminationofdiscriminationinrespectofemploymentandoccupation.

EC7,LA2,13-15,HR4

Environment

7 Businessesareaskedtosupportaprecautionaryapproachtoenvironmentalchallenges; EC2,EN18,26

8 Businessesshouldundertakeinitiativestopromotegreaterenvironmentalresponsibility;and EN1-29,PR3-4

9 Businessesshouldencouragethedevelopmentanddiffusionofenvironmentallyfriendlytechnologies.

EN2,5-6,10,EN18,26-27

Anti-corruption

10 Businessesshouldworkagainstcorruptioninallitsforms,includingextortionandbribery. SO2-4


iNdEPENdENT ASSuRANCE REPORT TothereadersoftheSustainableDevelopmentReport2012ofSmurfitKappaGroupplc.

iNTROduCTiONWewereengagedbytheBoardofDirectorsofSmurfitKappaGroupplc(further:‘SmurfitKappa’)toprovideassuranceontheSustainableDevelopmentReport2012(further:‘theReport’).TheExecutiveDirectorsofSmurfitKappaareresponsibleforthepreparationoftheReport,includingtheidentificationofmaterialissues.Ourresponsibilityistoissueanassurancereportbasedontheengagementoutlinedbelow.

SCOPEOurassuranceengagementwasdesignedtoprovidelimitedassuranceonwhethertheReportispresentedfairly,inallmaterialrespects,inaccordancewiththeG3.1GuidelinesoftheGlobalReportingInitiative.

Wedonotprovideanyassuranceontheachievabilityoftheobjectives,targetsandexpectationsofSmurfitKappa.

Proceduresperformedtoobtainalimitedlevelofassuranceareaimedatdeterminingtheplausibilityofinformationandarelessextensivethanthoseforareasonablelevelofassurance.

REPORTiNG CRiTERiA ANd ASSuRANCE STANdARdSmurfitKappaappliestheSustainabilityReportingGuidelinesoftheGlobalReportingInitiative(G3.1)asdescribedinthesectionRelationshiptoGRIGuidelines.Itisimportanttoviewtheperformancedatainthecontext ofthesecriteria.

WeconductedourengagementinaccordancewiththeInternationalStandardonAssuranceEngagements(ISAE3000):AssuranceEngagementsotherthanAuditsorReviewsofHistoricalfinancialInformation,issuedbytheInternationalAuditingandAssuranceStandardsBoard.Thisstandardrequires,amongstothers,thattheassuranceteampossessesthespecificknowledge,skillsandprofessionalcompetenciesneededtoprovideassuranceonsustainabilityinformationandthattheycomplywiththerequirementsoftheCodeofEthicsforProfessionalAccountantsoftheInternationalfederationofAccountantstoensuretheirindependence.

wORk uNdERTAkENOurproceduresincludedthefollowing:

n Ariskanalysis,includingamediasearch,toidentifyrelevantsustainabilityissuesforSmurfitKappainthereportingperiod;

n Evaluatingthedesignandimplementationofthesystemsandprocessesforthecollection,processingandcontroloftheinformationintheReport,includingtheconsolidationofthedatafortheReport;

n Interviewswithrelevantstaffatcorporatelevelresponsibleforthesustainabilitystrategy,policies,communicationandmanagement,aswellasotherrelevantstaffatcorporatelevelresponsibleforprovidingtheinformationfortheReport;

n VisitstoproductionsitesinWrexenandDüsseldorf(Germany),NerviónandMengibar(Spain),Valencia(Venezuela)andCali(Colombia)toreviewthesourcedataandthedesignandimplementationofcontrolsproceduresatlocallevel;

n Evaluatinginternalandexternaldocumentation,basedonsampling,todeterminewhethertheinformationintheReportissupportedbysufficientevidence;

n Ananalyticalreviewofthedataandtrendexplanationssubmittedbyallproductionsitesforconsolidationatcorporatelevel.

CONCluSiONBasedontheproceduresperformed,asdescribedabove,nothinghascometoourattentiontoindicatethattheReportisnotfairlypresented,inallmaterialrespects,inaccordancewiththeG3.1GuidelinesoftheGlobalReportingInitiative.

Amstelveen,21June,2013

KPMGSustainability, partofKPMGAdvisoryN.V.

WimBartels,Partner


GlOSSARy

BOD BiochemicalOxygenDemand(oneelementoftheCOD,unit:mgO2/litre)referstothelevelofoxygenuptakebymicro-organismsinasampleofwatermeasuredoveraperiodoffivedays.

Biodiversity Generaltermtodescribethevarietyoflifeforms(floraandfauna)inanecosystem.

Biofuels fuelscomingfrombiomass(woodrejects,bark,blackliquorproducedduringtheproductionofvirginpulps,pitchoil,biomasspartofmixedwastesandbiogasproducedduringtheanaerobictreatmentofwater).

Black liquor Residuefrompulpingthatcontainsorganiccompounds(likelignin).Thisresidueisburntinpapermillstoproduceenergy.

CDP TheCarbonDisclosureProjectisanindependentnot-for-profitorganisationholdingthelargestdatabaseofprimarycorporateclimatechangeinformationintheworld.

CEn ComitéEuropéendeNormalisation.TheEuropeanCommitteeforStandardisationismajorproviderofEuropeanstandardsandtechnicalspecifications.

CEPI CEPI,theConfederationofEuropeanPaperIndustries.Itisanon-profitorganisationrepresentingtheEuropeanpulpandpaperindustry.

Certified wood product Certificationisgiventocompaniesandlandownerstoverifythattheirforestrypracticesareconsistentwithrequirementslaiddowninthesestandards.Onlycertifiedwoodproductmightcarryalabel.Thelabelonwoodproductsguaranteesthatconsumerscantrustthesources.ActualcertificationiscarriedoutbyindependentcertificationorganisationsthatareaccreditedbyfSCorPEfCorSfItocarryout.

CHP CombinedHeatandPower:acombinationofaboilerandagasand/orsteamturbinethatsimultaneouslyproduceselectricityandthermalenergy(steam)byburningfuels.Thissystemisconsideredtobethemostefficienttechnologyinindustriesusingbothsteamandelectricity.Whenmillssellpartoftheirproducedsteamtoanexternalpartyorhavenetelectricityexport(sellingmoretoanexternalpartythanpurchasing),theconsumptionoffuelandemissionsreportedforthismillisadjustedtoreportonlythatpartusedtoproducepaper.Thisadjustmentisbasedonareferenceheatboilerwithanefficiencyof90%,whichisalsousedbyCEPIandtheEuropeanCommissionforEUETSbenchmarkcalculations.

CHP (outsourced) ACHPinstallation,belongingtoanexternalparty,locatedatornearaSmurfitKappasitefordeliveringelectricityandsteamtotheSmurfitKappaproductionfacility.AllfuelsandelectricityusedfortheproductionofpaperaswellasemissionsrelatedtothatareincludedinthefiguresfortheSmurfitKappaproductionfacility.

COD ChemicalOxygenDemandisthemostcommonlyusedtesttomeasuretheamountoforganiccompoundsinwater(unit:mgO2/litre).Theresultindicatesthelevelofallorganiccompoundsthatcanbeoxidisedbyastrongoxidisingagent.

CoC ChainofCustodyCertificationapplyingtowood/fibrematerialandproducts.ChainofCustodyisaninformationtrailaboutthepathtakenbyproductsfromtheforestor,inthecaseofrecycledmaterials,fromthereclamationsitetotheconsumerincludingeachstageofprocessing,transformation,manufacturing,anddistributionwhereprogresstothenextstageofthesupplychaininvolvesachangeofownership.

Co-generation ElectricitygeneratedbyaCHPsystembelongingtoourorganisationorfromaCHPoutsourced.

Containerboard Papersandboardsmainlyusedinthemanufactureofcorrugatedboard.Theyaremadefromvirginorrecoveredfibres.Includedarekraftliner,testliner,semi-chemicalflutingandrecycledfluting.

Corrugated board Structuredboardmadebyacorrugatorusuallyformedbygluingonewaveformedliner(calledfluting)inthemiddletotwoflat-facingsheetsofcontainerboard(kraftlinerortestliner)outside.

CO2 biogenic Carbondioxideemittedwhenburningbiofuels.ThisCO2 isconsideredtobecarbonneutralasitisremovedfromtheatmosphereandstoredinbiomasswithinashortperiodoftime.

CO2 fossil Carbondioxideemittedwhenburningfossilfuelsfortheproductionofpaper.Thecalculationismadeaccordingtointernationalguidelinesfromthecarboncontentofeachfuel(WR/WBSCDGHGprotocol).

CO2 indirect fossilcarbondioxidegenerated,externallytothesite,toproducetheelectricitypurchasedfromthegridbythecompany.Source:InternationalEnergyAgencyDataServices.2009:“CO2 emissionsfromfuelcombustion(2009Edition)”.

Carbon dioxide equivalent CO2-eq

Ametricmeasureusedtocomparetheemissionsfromvariousgreenhousegasesbasedupontheirclimatechangepotential(CCP).TheCO2-eqcarbondioxideequivalentforotheremissionsisderivedbymultiplyingtheamountoftheemissionbytheassociatedCCPfactor.

CSR CorporateSocialResponsibility:aconceptwherebyorganisationsconsidertheinterestsofsocietybytakingresponsibilityfortheimpactoftheiractivitiesoncustomers,suppliers,employees,shareholders,communitiesandtheenvironmentinallaspectsoftheiroperations.

Dust Particlescomingfromthecombustionoffuels.Dustemissionsaremeasuredmainlybythemills.Wheredustisnotmeasured(convertingplants),emissionsarecalculatedfromfuelconsumptionusingtheemissionfactorslistedintheEcoinventdatabaseversion2.1.

EBITDA Earningsbeforeinterest,taxes,depreciationandamortisation.

ElCD EuropeanReferenceLifeCycleDatabase.TheELCDhasbeendevelopedwithinthe“EuropeanPlatformonLifeCycleAssessment”thatisaprojectoftheEuropeanCommission,carriedoutbytheCommission’sJointResearchCentre,InstituteforEnvironmentandSustainability(JRC-IES).


Environmental Management System

Asetofprocessesandpracticesthatenableanorganisationtoreduceitsenvironmentalimpactandincreaseitsoperatingefficiency.

Emissions Trading Scheme Aschemecalculatedtoallocategreenhousegasallowancesforalistofspecificactivities.

Fluting Thewavyformedmiddlelayerincorrugatedboard.

Fossil fuels fuelsoriginatingfromnaturalresources(gas,oil,coal,peatandlignite).

FSC TheforestryStewardshipCouncilisanindependent,non-governmental,organisationestablishedtopromotetheresponsiblemanagementoftheworld’sforeststhroughindependentthirdpartycertification.

Gigajoule Unitofenergythatgenerallyappliestofuel.1gigajoule(GJ)=onebillionjoules=109joules.

GRI TheGRI(GlobalReportingInitiative)reportingframeworkisthegenerallyacceptedframeworkforreportingonanorganisation’seconomic,environmentalandsocialperformance.Thesustainabilityreportingguidelinesgivethereportingprinciples,andthelistofperformanceindicators,foreachofthethreekeyareasthatshouldbedisclosedinasustainabilityreport.

Grid supply Electricitypurchasedfromanationaldistributionnetwork.

GWh Unitofenergy,generallyappliestoelectricity–1GWh(GigaWatthour)=1MillionKWh(KiloWatthour).

Hectare Aunitofarea.Onehectare(Ha)=10,000m2.Onehectare=2.471acres.

IlO InternationalLabourOrganisation.

Inorganic raw materials Rawmaterialusedformanufacturingourproductsthatarenotorganicsuchas:fillers,sodiumhydroxide,sodiumsulphateandcalciumoxide.

Innotools Innotoolsisauniquesoftwaresuitefordevelopingfit-for-purposepacking.Itcomprises:Innobook,aninternallibrarywithalmost5,000provendesignsolutionsusedextensivelybydesignersinSmurfitKappa;PackExpert,anadvancedstatisticalmodelusedtodeterminethepackagingperformanceinthecustomer’ssupplychain;andPaper-to-Box,asophisticatedsoftwaretoolusedtopredictboxperformancebasedonboarddesignandcomposition.

ISO 9001 Schemecertifiedbyindependentthirdpartythatensuresthattheoperationcertifiedappliesinternationallyrecognisedstandardsandproceduresofqualitymanagement.

ISO 14001 Schemecertifiedbyindependentthirdpartythatensuresthattheoperationcertifiedappliesinternationallyrecognisedstandardsandproceduresofenvironmentalmanagement.

ISO 17025 Thisinternationalstandardliststherequirementstoallowtheaccreditationbyauthorisedthirdpartyofatestinglaboratoryandtoverifyitsproficiency.

ISO 22000 Thisstandardspecifiesrequirementsforafoodsafetymanagementsystemwhereanorganisationinthefoodchainneedstodemonstrateitsabilitytocontrolfoodsafetyhazardsinordertoensurethatfoodissafeatthetimeofhumanconsumption.

kTonne OnekTonne=1,000tonnes,whereonetonne(metrictonne)=1,000kilograms.

Kraftliner Papermademainlyfromvirginwoodfibres.

Mm3 1millioncubicmetres.

MJ Megajoule,aunitofenergy.1megajoule(MJ)=1millionjoules=106joules.

MWh Unitofenergy,generallyappliestoelectricity–1MWh(MegaWatthour)=1,000KWh(KiloWatthour).

natura 2000 Natura2000isanecologicalnetworkofprotectedareasintheterritoryoftheEuropeanUnion.InMay1992,governmentsoftheEuropeanUnionadoptedlegislationdesignedtoprotectthemostseriouslythreatenedhabitatsandspeciesacrossEurope(theHabitatsDirective).

nGO ANon-GovernmentalOrganisation(NGO)isalegallyconstitutedorganisationcreatedbyprivatepersonsororganisationswithnoparticipationorrepresentationofanygovernment.

n (nitrogen) TotalNitrogenisthesumoforganicnitrogen,ammonia,NH3andammonium,NH4+dischargedwiththeprocesswater.

nOx Mixofnitrogenoxides(NOandNO2)calculatedasNO2 (nitrogendioxide)comingfromcombustionoffuels.Theycancontributetotheacidificationofsoilandwater.NOxemissionsaremeasuredmainlybythemills.WhereNOxisnotmeasured(convertingplants),emissionsarecalculatedfromfuelconsumptionusingtheemissionfactorslistedintheEcoinventdatabaseversion2.1.

non-Controversial origin Virginwoodorwoodfibrewhichhasbeenverifiedashavingalowprobabilityofincludingwoodfromanyofthefollowingcategories,inlinewithfSCandPEfCschemes:

a) Illegallyharvestedwood;b) Woodharvestedinviolationoftraditionalandcivilrights;c) Woodharvestedinforestsinwhichhighconservationvaluesarethreatenedbymanagementactivities;d) Woodharvestedinforestsbeingconvertedfromnaturalandseminaturalforesttoplantationsor

non-forestuse;e) Woodfromforestsinwhichgeneticallymodifiedtressareplanted


OECD OrganisationforEconomicCo-operationandDevelopment.

Other organic raw materials

Rawmaterialsusedformanufacturingourproductsthatareorganicexcludingfibres,starchorplasticrawmaterialswhicharereportedindividually.Thiscategoryincludesoil,lubricantandorganicadditivessuchascolorantordyes.

PEFC ProgrammefortheEndorsementofforestCertification.PEfCisanindependent,non-governmentalorganisationwhichpromotessustainablymanagedforeststhroughindependentthirdpartycertification.

P (Phosphorous) Totalphosphorousisthesumofphosphorouscompoundsdischargedwiththeprocesswater.

PJ Petajoule,aunitofenergy.1petajoule=1,000terajoules=1015joules

Process water Quantityofwatercontainingorganiccompoundsreleasedtotheenvironment(river,sea)afterinternalwatertreatmentorreleasedtoanexternaltreatmentplant(municipalwatertreatment).Inallcases,levelsofpollutantsreleasedarereportedasoutputsofthecompanyeveninthecaseofoperationsthatsendprocesswatertoexternaltreatment.

Purchased pulp Pulpproducedbythirdpartycompaniesandpurchasedbyourmillstoproducepaperorboard(thepulpsaremainlybleached).

REACH REACHistheRegulationforRegistration,Evaluation,AuthorisationandRestrictionofChemicals.REACHappliestoallchemicals:notonlychemicalsusedinindustrialprocessesbutalsochemicalsinarticlessuchaspaperandpackaging.

Recovered paper Recoveredpaperreferstousedpaperandboardseparatelycollectedandclassifiedforthepurposeofrecyclingforuseasrawmaterialinthemanufactureofnewpaperandpaperboard.

Renewable energy Energycomingfromsourcesthatarenaturallyrenewable(e.g.biomass,hydropower).

Sludge Asolidwastethatisproducedduringwatertreatmentfrombiologicalactivity(mainlyaerobicstage).

Sedex Sedex,theSupplierEthicalDataExchange,isamembershipnot-for-profitorganisationforbusinessescommittedtocontinuousimprovementoftheethicalperformanceoftheirsupplychains.Sedexfocusesonfourpillars:LabourStandards,HealthandSafety,EnvironmentandBusinessIntegrity.

Solid Wastes Wastesareclassifiedasnon-hazardouswastesorhazardouswastesandarereportedseparately.Woodwastesandcorrugatedboardshavingsareexcluded.Allamountsofwastesarereportedinmassasdisposed.

Total non-hazardous wastes

Sumofallsolidnon-hazardouswastesthataregoingtolandfillorarerecoveredorcompriseotherwastes.Eachcategoryofnon-hazardouswastesisdefinedandreported.

Non-hazardous wastes Landfill

Partofthenon-hazardouswastesthataredisposedofineitherinternalorexternallandfillinaccordancewithnationallegislation.

Non-hazardous wastes Recovery

Partofnon-hazardouswastesthatarereusedorrecycledorcompostedorusedinagricultureorincineratedwithenergyrecovery.

Non-hazardous wastes Other

Partofnon-hazardouswastesthatdoesnotbelongtothetwopreviouscategories.Thisincludeswastesincineratedwithoutenergyrecoveryorwastesforwhichthefinaldisposalisuncertain.

Hazardous wastes Residuesofoilsandotherhazardouswastes(buildingwastescontainingasbestos,inkresidues,etc.).

SOx MixofsulphuroxidescalculatedasSO2 comingfromcombustionoffuels.Sulphurdioxidecontributestotheacidificationofsoilandwater.SOxemissionsaremeasuredmainlybythemills.WhereSOxisnotmeasured(convertingplants),emissionsarecalculatedfromfuelconsumptionusingtheemissionfactorslistedintheEcoinventdatabaseversion2.1.

SVHC SubstancesofVeryHighConcernaredefinedinArticle57ofREACHRegulation(EC)No1907/2006andincludesubstanceswhichareCarcinogenic,MutagenicortoxictoReproduction(CMR)orPersistent,BioaccumulativeandToxic(PBT)orveryPersistentandveryBioaccumulative(vPvB).

Testliner Papermanufacturedfromrecycledfibres.

TJ Terajoule,aunitofenergythatgenerallyappliestofuel.1terajoule=1,000gigajoules=1012joules.

Total Suspended Solids TotalSuspendedSolidsreferstothelevelofsmallsolidparticlesreleasedwithprocesswater.

Virgin fibre Pulpobtainedthroughachemicalprocessusedtoremoveligninfromwood.Asaresult,thefibrecanbeusedtoproducepaper.Theligninresidueandotherorganiccompoundsaresubsequentlycollectedandusedintheformationofblackliquor.

WFn WaterfootprintNetwork(WfN)isanon-profitinternationalnetwork.ThemissionoftheWfNistopromotethesustainable,fairandefficientuseoffreshwaterresourcesworldwide.


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